There are times when a company has leased more commercial real estate space than is needed. They may have downsized or their business decreased. It is quite an expense to pay rent for space that is no longer adding to profits. Such a commitment to a lease is a waste of company funds. If the lease is for an extensive period of time, that company may want to do a sublease to minimize any loss of money.
Prior to entering a subleasing agreement, check to make sure the landlord allows subleasing agreements on the property. There may be allowable subleasing but with restrictions. Understand the terminology of the sublease. It is crucial to understand any clause against subleasing to a competitor in the area. The broker should be ready to present a sublease recovery analysis for the property. This is something they should be prepared to give and advise you on possible misunderstandings regarding the terms.
Subleases have limitations about renovations that may be requested. A company that subleases is not typically prepared to spend any money on renovations. Often the square footage must be subleased at a rate lower than the original lessee pays.
Accept a tenant for subleasing only after an investigation of financial status, type of industry and willingness to enter into a contract lasting as long as you are under lease. Evicting a subtenant is not a situation you want to place your company in. Notify the original landlord of your intentions prior to entering into a sublease.
Subleasing unnecessary space is a time-consuming process. Sometimes the landlord can recoup any profits you make. There are possible lease restrictions on the amount you can charge and if you must share it with the original landlord.