Subleases in Commercial Real Estate: Know Your Rights!

CRE is a dynamic industry. Businesses are forever changing, which means that their requirements from commercial premises change, which impacts the property they require. Many businesses decide to subleasing the properties they no longer need.

If your organization is looking to do the same, it’s essential to know your rights and responsibilities:

Landlord approval

The first step is to get approval from the current landlord to allow a sublet on their premises. If the lease with the landlord doesn’t explicitly mention it can’t be subleased, then the tenant can move on to get written approval from the landlord.

If the tenant fails to inform the landlord, they have the right to evict and take legal steps since an unknown third party has been occupying the premises.

Rent responsibilities

A sublessee pays rent to the tenant, also referred to as the sublessor. The sublessor can choose to share the premises with another business or allow them to rent out the entire place. In both cases, however, they do not pay rent directly to the landlord.

The sublessor is responsible for making the rent payment and following the terms of the lease agreement. The original tenants have to be very careful about the sublet they take on. A thorough background check and credit check is essential.

The sublessor can choose the rent you’d like the new tenant to pay. It could be more or less than the original rental amount. Some state laws on the subject do vary, so it’s best to have a look through that before finalizing things.

Damage and repair responsibilities

Any damage to the property is the problem of the original tenant, legally. They have to technically get it fixed, unless it’s covered in the sublease. But if a sublessee refuses to pay for the damage, there’s little that can be done. Since the sublessor is accountable to the landlord, they’ll have to get the repairs done. Remember that a sublease can never supersede the original lease, making subleasing risky business.

Assignable rights

A sublessor cannot give rights to the new tenant that’s not stated in the terms of their original lease agreement. Let’s say, the original lease has a certain number of parking spots allocated; more parking spots cannot be assigned to them.

Lease cancellation

It’s possible for a sublessor to ask for permission to do extensive renovations or extend the property. Such changes won’t be allowed according to the original lease with your landlord. The best way out is to negotiate a cancellation of the lease with the landlord. The landlord can come up with a new agreement with the prospective tenant.

Global Capital Partners Fund can help you with getting your commercial real estate. They provide CRE financing on favorable terms and all the information you need on subleasing the property. They also provide asset based loans as well as hard money loans in Knoxville TN. Visit their website for more information or speak with their representatives at +1-800-514-7350.

Categories: Real Estate

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