Sometimes businesses end up with more space than they need. Other times, they grow faster than expected and need to relocate to a new office location. Instead of breaking the lease and losing the deposit (and sometimes even paying rent on vacant space until it’s re-leased) a tenant will often sublease its rented office space.
In this article we’ll cover important things to know if you decide to sublease your office space.
What Is a Sublease?
A commercial lease is a written agreement between the landlord and the tenant. The landlord is the lessor and the original tenant is the lessee.
In a sublease, the original tenant leases out part or all of its space to a new tenant. When this happens, the original tenant acts as the sublessor, and the new tenant becomes the sublessee or the subtenant.
By the way, a sublease isn’t the same thing as assigning your lease. As the original tenant, you’re still responsible for the terms and conditions of the original lease you signed with the landlord. It’s up to your to enforce the terms of your sublease with your subtenant.
7 Steps to Sublease Your Office Space
Subleasing your office space involves more than just finding a subtenant and collecting their rent check. Here are 7 important steps to consider if you sublease your office space:
- Read your original lease to make sure you’re allowed to sublease and if there are any restrictions on subletting.
- Let the neighboring tenants know you want to sublease your space in case they’re thinking about expanding or have a referral.
- Screen applicants who want to sublease your space, making sure that they’re credit-worthy, aren’t disruptive, and will pay the rent to you so you can pay your landlord.
- Determine the fair market rent for your space that’s already built out and furnished, and any amenities or shared services you’ll be providing the sublessee.
- Collect a security deposit to cover potential damages from your subtenant.
- Agree on the sublease terms and conditions with your subtenant.
- Finalize everything by signing a written agreement for the sublease.
Check for lease restrictions before subletting
Not all commercial leases give a tenant the right to sublease. When office leases do allow subleasing, they often include restrictions on subletting. A few examples of such restrictions are listed below:
- subleasing to other tenants already located in the same building is prohibited;
- discounting your rent to a tenant who wants to sublease your space;
- collecting more rent from a sublease isn’t allowed, meaning you can’t profit from the sublease;
- subleasing to a prospect with whom the landlord is already negotiating;
- entire space must be sublet;
- subtenant must have at least the same credit quality as you do;
- subletting isn’t allowed if the landlord has vacant space available in the building.
5 Potential Drawbacks to Subleasing Your Office Space
Subleasing your office space to another tenant might save money. However, there are also potential drawbacks to it:
- damages caused by the sublessee are your responsibility;
- office floorplan can make subleasing impractical;
- subletting part of your office space affects privacy and sharing of sensitive information;
- culture of the office may change if the sublessee’s business or work style isn’t compatible with yours;
- if you sublease to a bad tenant that doesn’t pay you or breaks the terms of your original lease, eviction can be difficult since you’re not the actual landlord.
Tips for Sublessee Tenants: Pros & Cons of Subleasing Office Space
If you’re a tenant thinking about being a sublessee and subleasing space from someone else, there are a few pros and cons to consider:
Pros of being a sublessee
- Can be easier than signing a long-term office lease;
- Start small if the sublessor is offering just part of their space;
- Office space is move-in ready;
- Access to existing administrative support such as sharing a receptionist;
- Use of existing services such as internet access and phone lines.
Cons of subleasing office space from someone else
- Unfavorable terms of the existing lease will be passed on to you;
- Lack of professional privacy, when only leasing a part of the space;
- Harder to project your business image;
- Maintenance requests delayed when you have to go through the sublessor;
- If the sublessor doesn’t pay the landlord rent, you could be evicted through no fault of your own.
Is an office space sublease right for you?
Once you’ve considered the pros and cons of subleasing your office space, you’re on your way to saving money on the rent while you downsize or look for new office space to grow into. Just make sure to do your research first.
If you’re a tenant, subleasing space can be a great way to transition from a home office or shared workspace into an office of your very own. You’ll be moving into a space that’s turnkey at a cost that’s more budget-friendly than signing a traditional long-term office lease.