SUBLEASING IN TODAY’S MARKETPLACE
Subleasing in today’s market is commonplace. There are a variety of reasons why firms sublease their excess space. However, for those who intend to sublease, some caution is appropriate.
Make sure to check on the credit and payment history of the firm subleasing the space, particularly if they will pay any part of the gross rent due and payable to the Prime Landlord.
Carefully read and understand the tenant obligations under the Prime Lease. This is often an attached exhibit to the sublease document. The Subtenant’s obligation is to comply with the terms of the Prime Lease.
Make sure to receive the Prime Landlord’s formal approval, in writing. Sometimes this is as simple as a signed consent note on the signature page of the sublease document. On the other hand, the consent form can be several pages. If the Prime Landlord’s consent in the Prime Lease is something other than “reasonable,” make sure to understand what the “other” stipulations are.
If modifications are made to the space, understand the obligations in respect to the lease. Removing modifications may be a requirement upon termination of the sublease.
Make sure the life safety and exiting requirements meet local codes. Often times, a space carved from a larger space does not meet the proper exiting requirements, which may mean extra costs.https://paramountre.com/agent/phil-simonet/
For firms whose growth is uncertain . . . or . . . perhaps a firm that is opening a new office or starting a business . . . subleasing space can be a sound alternative. However, just as with any real estate transaction, caution is always in order.
Get to Know The Sublessor:
First, it helps to understand why the original tenant wants to sublease. Is their business struggling? Have they lost a number of key employees? Did they overestimate their future growth? Or perhaps they are reconfiguring their space into a more collaborative environment and find they don’t need all of the space. What are their future plans? When does the prime lease expire? All of this is key since subtenants must comply with the terms of the prime lease.
Second, most sublease space is leased in an “as is” condition, meaning that the prime tenant will provide no dollars for any changes to the space. Therefore, review the language of the lease to see what restrictions might apply to any alterations. Generally, the prime landlord’s consent and approval is mandatory. Also, if you plan to make any significant changes, consult the prime landlord. Changes that actually affect the configuration or general function of the space can cause problems in re-letting the space once you move out.
Have an Real Estate Professional Review the Lease:
Lastly, ensure that the terms of the sublease document are sound and complete and that you, as the subtenant, are protected in the event of some kind of default by the sub-landlord.
If we can offer any advice or assist in any way, please feel free to contact Paramount. Proper preparation before moving forward is essential to any successful real estate transaction.
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