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Subleasing

During hard economic times, subleasing space can be a smart way for businesses to increase their income. By renting out unused portions of their leased space to subtenants, businesses can offset some of their rent and other expenses. Subleasing can also help businesses generate revenue without having to take on additional financial obligations, such as a long-term lease or a business loan. Additionally, subleasing can provide opportunities for collaboration and networking with other businesses in the same space, which can lead to new partnerships, new marketing, and new customers. If you are considering entering into a commercial sublease, it is essential to understand the key parts of the original lease agreement.

First, a commercial sublease should identify the parties involved, including the original tenant, the subtenant, and the landlord. The sublease should also specify the portion of the leased space that the subtenant will occupy, including the square footage, any shared common areas, and any shared equipment.

Second, the sublease should clearly outline the duration of the sublease and the terms of the agreement. This should include the obvious such as the start and end dates of the sublease and any renewal options, but should also include and any notice requirements for terminating the sublease and provisions for starting the lease early. With the term of a sublease, it is important to consider the time it takes for a subtenant to physically move in and out of the space.

Another important part of a commercial sublease is the allocation of costs and expenses. There are many other fees to consider other than rent, like utilities, maintenance fees, and other expenses that will be shared between the original tenant and the subtenant. Many commercial subleasers fail to include maintenance costs of community areas in their terms. For instance, if you are considering subleasing, be sure to include costs of community area maintenance and other fees in the sublease.

When it comes to proportioning rent for the subtenant, there are several methods that can be used. One common approach is to prorate the rent based on the square footage of the leased space that the subtenant occupies. For example, if the subtenant occupies 25% of the leased space, they would be responsible for 25% of the rent. Another approach is to divide the rent based on the amount of time that the subtenant will occupy the space. This is often used when the subtenant is only renting the space for a portion of the original tenant’s lease term, or on a temporary basis.

It is also important to consider any provisions for rent increases or decreases during the sublease term. The sublease should specify how any changes to the rent will be calculated and when they will take effect. Likely, a landlord’s master lease includes automatic rate hikes for yearly rent, the sublease should match.

In summary, a commercial sublease should include clear and detailed information about the parties involved, the duration of the sublease, the allocation of costs and expenses, and the proportioning of rent for the subtenant. By understanding these key parts of a commercial sublease, both the original tenant and the subtenant can enter into a mutually beneficial arrangement.

This blog is for educational purposes only and does not constitute legal advice. This article, or contacting Apex, does not in any way form an attorney-client relationship. Speak to a licensed attorney if you need help or advice in how your organization should dissolve. If you have any questions or would like to learn more, please contact us at contactapex@apexlg.com, visit our blog, or check out Commercial Tenants, Take Advantage of the Recession!

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