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Can I sublease commercial or retail premises?

Yes, you can sublease commercial or retail premises, provided that the terms of your Lease do not prevent you from doing so.

Generally, a Lease will allow a tenant to sublet the whole or part of the premises, provided that the Landlord has first consented in writting.  The Lease will often set out the procedure that will need to be followed in order to secure the landlords consent. 

Landlords need to vet the Sublessee

The landlord will probably want to check the quality of the sublessee and satisfy itself that the sublessee will be able to meet it’s financial and other obligations.  The prospective subtenant may need to provide the landlord with references and other information required for the landlord to conduct their assessment.  Of course it’s wise for you to conduct your own assessment too!

Some Leases will not allow you to sublet and, if you have agreed to this in the terms of your Lease, you will be bound to them (unless the terms are in contravention of legislation to the contrary which cannot be contracted out of). 

Some Leases may give the landlord full discretion to consent or refuse a sublease, even if that decision is unreasonable.  If this is the case, you will be bound by the lessor’s decision (unless it is in contravention of legislation which cannot be contracted out of).

First Step - check the terms of your lease

If you are thinking about subleasing, the first thing you should do is refer to the terms of your signed Lease and the conditions regarding subleasing (if any) that are recorded in your Lease. 

If you are leasing a retail shop, the Retail Shop Act in your state may contain provisions relating to subleasing.  Such provisions differ from state to state, and generally allow the Landlord the discretion to refuse or allow subleasing.

Commercial Leases (ie. factories, warehouses, offices not engaged in retail) are generally not subject to legislation – so this is where the terms of your Lease are of paramount importance.

Is subleasing office space a good idea?

This depends on your own individual circumstances.

In many cases, it is seen as an advantage.

There is the obvious financial advantage of having a regular rental amount coming in.  This can be a big help to the survival of a business, especially when times are tough.

It is also cost effective for the subtenant, as rent and set up costs are kept substantially lower.  This is especially good for small start-up business to work up from.

There may also be some disadvantages to subletting.  For more information about the pros and cons of subletting, see here:  pros and cons of subletting

Further Information and Resources

What's the difference between subleasing and assignment of lease?

Pros and cons of subletting

What is the difference between lease and a licence?

Sublease Agreement

Assignment Agreement

 

By Ian MacLeod

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