Updated August 30, 2023
A commercial sublease agreement is a form utilized if a business or individual is attempting to sublease part of the commercial space that they are currently leasing. The form is also utilized to sublease a full property when an individual or corporation still holds a lease.
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What is a Commercial Sublease?
A commercial sublease is the act of a tenant re-renting space they currently lease to a subtenant. The tenant is required to obtain the consent of the landlord. Depending on the terms of the consent, the tenant may be limited in who they can rent to and how much they can charge for rent.
Landlord’s Consent
Landlord’s Consent Form – Any commercial space may be subleased with the consent of the landlord. Most leases prohibit the tenant to sublet the property, therefore, consent is required from the landlord.
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How to Sublease (6 steps)
- Read the Original Commercial Lease
- Market the Property
- Negotiating with the Subtenant
- Create a Sublease Agreement
- Start of the Sublease
- End of the Lease Term
1. Read the Original Commercial Lease
It will be critical to ensure that the original commercial lease agreement is reviewed in full. It is common to find provisions specifically prohibiting subletting the space. If so, the tenant must get permission from the landlord through a Landlord’s Consent Form.
3. Negotiating with the Subtenant
When finding a subtenant, it’s important to try and get as much rent as possible in addition to making sure they are able to pay rent.
- Background Check – It’s highly recommended that the subtenant undergoes a background check to ensure they have a reputable credit score (above 680) and no criminal history. Use a Background Check Consent before running any type of report.
- Tax Returns – Get the last 2 years of tax returns by the subtenant. Should include both corporate and individual filings.
After the subtenant is approved, the tenant and subtenant should come to an agreement and outline the rental arrangement.
5. Start of the Sublease
Once the sublease has been signed the current tenant must turn over the leased space by the start date. The subtenant will be given access to the premises after paying any security deposit and first month’s rent.
After taking occupancy, the subtenant will be able to operate their day-to-day business activities until the end of the lease term.
6. End of Lease Term
At the end of the lease term, the subtenant will be required to move out of the premises (unless a lease renewal is signed). In most cases, the tenant will be let out of the original lease, and negotiations on a new lease will begin between the landlord and subtenant.
Any non-payment of rent or damage caused by the subtenant during the course of the lease will be the responsibility of the tenant.
Elements of an Agreement
- Date of the agreement;
- Name and address of both parties, sublessor, and sublessee;
- The physical location of the property (street address);
- Term (time-period);
- Day rent is due;
- Monthly rent amount;
- Security deposit, late fees and penalties incurred (not paid timely, returned payments, etc.);
- Acceptable forms of payment (PayPal, cash, check, credit card, etc.);
- Responsible party of all services, maintenance, and utilities;
- Grounds for termination of the contract, expenses that may be incurred and who is responsible for payments and potential legal action;
- Communal or shared space provisions;
- Parking and visitor policies;
- Emergency and evacuation procedures;
- Insurance requirements; and
- Acceptable use of the premises.
Tenant’s Responsibility
If the sublessee (subtenant) does not pay rent or causes damage to the premises, the tenant is ultimately responsible. The tenant has the right to go seek damages from the sublessee, but the sublessee’s actions are ultimately the responsibility of the tenant.
Sample – Commercial Sublease
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Related Forms (1)
Office Space Sublease Agreement
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