Commercial Sublease Agreement

What a commercial leaseholder needs to do to sub-lease a commercial property.

There comes a time in the life of every business when change is necessary. Whether your business outgrows it’s current space, or you just want to relocate, your need for change may be thwarted if you can’t get out of your Commercial Lease Agreement.

If you need to move your business to a new location, or if you just want to close up shop, you may first need to find a new tenant that will take your place. To do this, you will need to enter into a Commercial Sublease Agreement. Here is what you need to know before you take this step:

What is a Commercial Sublease?

Whenever you enter into a Commercial Property Lease, you sign a binding contract with the property owner agreeing to all it’s terms and conditions.

Commercial property leases usually have a term of several years with options to extend the term. If you want to change premises or close the business, you may have to find someone who is willing to take your place. When you find that person, you can grant them the right to occupy the premises on your behalf if you enter into a Commercial Sublease Agreement.

When can I use a Commercial Sublease Agreement?

If you are a tenant in a commercial property, you may be able to assign your lease rights and duties to a third party. To do this, you will first have to ensure the terms of the commercial lease allow for such a transfer. You may have to ask permission of your landlord first, or you may be able to do so without their express consent. In other words, make sure you check your lease.

What is the difference between subletting and assigning a lease?

When you sublet all or part of the premises to another tenant you are still obliged to honour your obligations under the commercial lease contract with the landlord.

If you would prefer to Assign all your rights and obligations under the lease to another party, you would use an Assignment of Lease agreement. Under an Assignment of lease agreement, the new tenant agrees to assume all those rights and obligations on your behalf and indemnifies you against any further obligation to the landlord.

How do I enter into a Commercial Sublease Agreement?

You will need to make sure subletting the premises is permitted under the terms of the lease. Once you know you can sublet, you’ll need to find a potential tenant. After you find a suitable party, you’ll need draft and enter into a Sublease Agreement for Commercial Property that states the rights and duties of each party.

What needs to be stated in the Sublease Agreement?

Because the person you enter into the sublease with essentially becomes the new tenant, you will have to make sure the terms of the sublease agreement makes it clear who is responsible for what. Rent, duration, landlord’s duties, tenant’s duties, all of these issues must be made clear so no one is confused as to what their responsibilities are.

Can I sublet parts of the premises?

It may be possible to enter into a sublease agreement where you only grant the right to occupy part of the premises to the new party. Again, you’ll have to make sure it is ok with your landlord, but partial assignments are common.

Like any other legal contract, your Commercial Sublease Agreement needs to be clear, concise, and easy to understand. It doesn’t help anyone if your agreement is incomplete or weighed down with draconian terms and conditions. Not only that, but you want to make sure all parties involved can understand what their rights and obligations are. Ensuring your Commercial Sublease Agreement clearly states the intentions of both parties will protect those involved and avoid misunderstandings.