All About Sub-Leasing Commercial Spaces
harkins / April 20, 2018
Commercial real estate often rents for much longer terms than ordinary real estate. Contracts that specify leases of five or ten years are common, and lease terms as long as a hundred years are not unheard of. Those who hold long leases may be able to protect themselves from unforeseen business reverses or to ease their transition to a new location by subleasing to another business. This means that they find another tenant to fill out the remainder of their lease. The ordinary state of most commercial leasing contracts is to allow subletting, and the landlord of the property will only be able to intervene if the new tenant is manifestly unsuitable.
Many long-term commercial leases contain provisions requiring approval for the new subtenants. If subletter approval has not been specifically spelled out in the lease, then the tenant is free to behave as they wish. Although they still bear the final responsibility for making sure the rent is paid and the property is undamaged, they have free rein to decide who to sublet to and under what conditions. If the lease requires approval for the new subletter, then the tenant must observe all the provisions spelled out in the contract. These may include credit checks and other forms of due diligence for the prospective subletter. The lease may also contain provisions that allow recapturing by the property owner. This means that the landlord can cut off the existing contract and draw up a new one with the new tenant. Approval and recapture provisions are generally considered advantageous by landholders, whereas tenants usually negotiate for more freedom in their subletting rights.
No matter what, the subletter must be a reputable tenant who uses the commercial space in a way consistent with its facilities and zoning. They will be responsible for their actions within the commercial space and may be held liable for any illegal activity.
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