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The Risks and Benefits of Commercial Subleases

By James Lewis posted 01-02-2021 00:18

  

As commercial leases are for a lengthy time period and have monetary implications if a contract terminates early, subleasing to another business may make good sense. 

If you decide to sublease for your business, you do not lease the premises from the original owner but from another individual or entity who leases from the owner. There are various risks and benefits when it comes to commercial subleases. 

Include terms in the contract that meet your needs

As a sublessee, you need to make sure that your commercial sublease agreement protects you. For example, you may want to include the right to pay the landlord rent directly if the sublessor defaults. The agreement should also include written consent from the landlord as this can help to avoid disputes in the future. 

Click and check this article on NetLawman.co.uk, which gives considerations you need to keep in mind before subleasing. For example, you need to make sure there are no restrictions regarding subleasing in the original lease. There are some commercial lease agreements that specifically disallow subleasing. 

It is possible to download a legal sublease agreement template from NetLawman, customize it and print it. There are certain sublease agreements for commercial property that give the landlord greater involvement. 

Risks of a commercial sublease

There are some risks in having a sublease rather than an outright lease. It is important to do some due diligence and find out more about the arrangement between the person who wants to sublet to you and the original owner. For example, it is important to find out why the sublessor wants to sublease the property. 

It is also important for you to have a copy of the original lease. This is because the sublease operates within the original lease. Unfavorable terms in the original lease may be passed on to you.

Make sure there are no restrictions regarding subleasing in the original lease. There are some commercial lease agreements that specifically disallow subleasing.

Pay attention to conditions that could trigger a default. If the individual or entity subleasing to you defaults, you may lose the space. Creating a sublease agreement does not change the obligations of the original tenant. You may continue to pay your rent but if the sublessor doesn’t meet obligations regarding rent, the landowner may have the right to remove you from the premises, even though you are meeting your obligations. 

In some commercial leases, a landlord can even void a lease contract for various reasons, such as not approving of your type of business. 

Another disadvantage of subleasing is that you are often not permitted to adjust the space to your needs in the way you would if you were leasing from the landowner. In some situations, it isn’t possible to make the interior or exterior adjustments. 

If you are not responsible for maintenance because you have a sublease, you may have to wait before maintenance issues are resolved to your satisfaction. 

Benefits of a commercial sublease

There are a number of benefits of a commercial sublease, including that this can be an extremely well-priced option. Many commercial subleases involve properties that are part of a larger configuration, although this isn’t always the case. 

Subleased spaces are often more cost-efficient, which makes them perfect for small businesses or startups. You do not have to spend much money on the space you sublease either. 

As it is often a part of a larger property, you may not have to maintain common areas or do repairs. You may not have to pay for certain expenses, like security or internet access. It is also often easier to qualify for a sublease than a commercial lease. 

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