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Subletting

December 5, 2023
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Key Takeaways

Introduction:

In the world of commercial real estate, tenants have the option to sublet or assign their leased space to alleviate rental costs and avoid penalties for terminating a lease prematurely. 

However, it is essential to navigate the complex landscape of commercial real estate laws and understand your rights and obligations as outlined in the Commercial Lease Agreement. 

Key Takeaways:

  • Commercial real estate laws vary by state, so it’s crucial to understand your legal entitlements and the terms of your Commercial Lease Agreement.
  • When assigning a lease, a business tenant may still be liable for the property unless they obtain a formal release.
  • Subleasing provides flexibility, but it also adds responsibilities such as managing the subtenant.

How it Works:

Subleasing allows a tenant to transfer a portion of their rental rights to a third party for a temporary period. 

This can involve subletting a portion of the space while the original tenant continues to operate or renting out the entire space until the lease expires or the tenant returns. 

On the other hand, assigning a lease involves transferring the remaining interest of the lease to a third party, with the original tenant no longer planning to return to the space. 

In both cases, certain steps need to be followed to ensure a smooth transfer of lease rights.

Key Components:

For subleasing a commercial property, the key steps are:

  • Refer to your Commercial Lease Agreement
  • Provide notice to the landlord
  • Find a suitable subtenant
  • Draft and sign a Commercial Sublease Agreement
  • Carry out the sublease

Assigning a commercial lease involves the following steps:

  • Refer to your Commercial Lease Agreement
  • Find an assignee
  • Sign a Lease Assignment Agreement
  • Address liability and obtain a release
  • Assignee assumes possession and interest

Benefits:

Subleasing a commercial property can provide several advantages, including:

  • Financial Relief: Assigning a lease can provide significant financial relief for tenants who need to vacate their space before the lease term ends, avoiding penalties for early termination.
  • Transfer of Responsibilities: The assignee takes over lease obligations, reducing the original tenant’s burden.
  • Opportunity for Growth: Businesses that have outgrown their current space can move to a more suitable location without waiting for the lease to expire.

Takeaway:

Subleasing and assigning commercial leases are valuable strategies for businesses seeking flexibility and solutions to changing space requirements. 

While subleasing allows for temporary adjustment of rental commitments, assigning a lease can be a more permanent solution for businesses evolving beyond their current space. 

Subleasing can provide a pragmatic way to adapt to changing business needs without incurring unnecessary costs or legal complications.

Disclaimer: The information on this website, including glossary definitions, is for educational and informational purposes only and not intended as professional advice. While we strive for accuracy, we make no guarantees regarding the completeness, reliability, or timeliness of the information provided. We are not liable for any loss or damage arising from your use of the site. Investment decisions in commercial real estate should be made based on individual due diligence and professional advice. Laws and regulations are subject to change; always consult legal and financial experts before making decisions.

Source:
https://www.lawdepot.com/resources/real-estate-articles/subletting-vs-assigning-a-commercial-lease/?loc=US

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