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Negotiation Tips for Commercial Sublease Space

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Today's Tenant Rep Tuesday Tip topic: Negotiation Tips for Commercial Sublease Space

Commercial real estate subleases can be a great option to lock in below market rental rates, shorter lease terms, and free furniture. 

Negotiating the basic sublease terms is the simple part, however since most commercial sublease contracts are tied to the original master lease between the tenant and landlord it's important that you carefully review the original master lease before signing any sublease contract.

 

Financials

Just like a Landlord or Subllandlord would want to review the Subtenants financials to ensure that they can afford to pay the rent, it's important that the Subtenant review the Sublandlord's financials. The reason is that in most leases if the Sublandlord defaults because they don't pay rent then the landlord can lock the doors and ask you to move out. 

 

Restoration Clauses

Negotiate to avoid having to restore the space to its original condition. Many leases or subleases have a restoration clause. Be sure to include in your proposal for the Subtenant to not be required to remove any of the original tenant improvements or restore or remove any subsequent alterations or improvements allowed to be made by Subtenant. 

 

Landlord Consent

With any sublease between a Subtenant and Sublandlord the Landlord has final approval. This is usually stated in the Master Lease, and the terms and conditions of the consent are on a Landlord's Consent to Sublease document that is attached to the Sublease contract.

If you are the Subtenant you want to also negotiate with the Landlord the right to occupy and lease the space in the event the Sublandlord defaults. The termination of the lease by the Landlord should not terminate the Sublease, nor shall the Landlord disturb the Subtenants use and possession of the space.


Right to Sub-Sublease

Just because the original lease has a Sublease / Assignment clause that does not mean the Sublease / Assignment right conveys to the Subtenant.

The Subtenant needs to negotiate the right to sublease themselves in the event they need to dispose of the space. 

 

 

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