Need Commercial Space or Want to Reduce Overhead? Consider Subleasing

September 15, 2012

Need Commercial Space or Want to Reduce Overhead? Consider Subleasing

A significant portion of any business' budget goes toward operating its physical space. Finding the perfect location, appropriate space and cost-effective commercial property is paramount to running a successful company.

A business may not have the necessary resources to build or purchase its own property outright. Additionally, a potential tenant may be wary of entering into a long-term lease with a landlord, with its associated costs and higher risk. Similarly, a business with an existing lease may find itself operating with unused commercial space and hence wasting money. In either situation, a business may benefit by subleasing commercial property.

Almost all landlord-tenant agreements contain certain provisions regarding assignment or subletting. A prospective tenant of a leased space should have the existing lease or rental agreement reviewed before pursuing taking an assignment of an existing lease or subleasing as an option, since it is customary for landlords to retain the right to consent to both assignment and subletting. Similarly, any business looking to sublease property from an existing tenant must make sure the original lease or rental agreement permits the subtenant to use the space as it intends.

Benefits of a Sublease

An attractive aspect of a sublease is that it can be simpler and less expensive than a traditional landlord-tenant agreement. In addition, most subleased spaces are already finished, so tenant modifications of the space may not be required. Additional savings may come from shared overhead, such as having one receptionist for two or more businesses. A subtenant also may be able to obtain amenities, such as Internet access, copy machines or heating and cooling costs, without charge.

Networking may also make subleasing appealing. Two similar businesses or businesses that complement each other may benefit by operating in close proximity. For example, a coffee shop may sublease space inside of a bookstore, or a healthy foods company may sublease space inside of a fitness center. An accountant may sublease space to another accountant with a different specialty, which may enhance the ability for them to refer clients to each other, for their mutual benefit.

Reasons Not to Pursue a Sublease

There are, however, some disadvantages to a sublease. Terms of a sublease likely will be influenced by the original landlord-tenant agreement. If the original tenant negotiated a bad deal, it may try to pass along costs to a subtenant.

A subtenant also is often unable to change the decor or signage of commercial space. In addition, finding the right space to sublease can be problematic or expensive if the existing improvements are incompatible with the new, proposed use .

Contact an Attorney

Finding the right space for a business is extremely important to its ultimate success. Any business looking for commercial space should consult with an experienced commercial real estate attorney who can comment on proposed locations, to determine if subleasing at those locations is appropriate, and to assist in negotiating acceptable rental terms.

Article provided by Federoff Kuchmay LLP
Visit us at http://www.federoff-law.com/