Commercial property sublease agreements

Written by devra gartenstein
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Commercial property sublease agreements
Read a business sublease agreement carefully before signing. (Studying lease agreement image by Elzbieta Sekowska from Fotolia.com)

Although it would be lovely if all business lease agreements worked out, business lease terms often span years and your business can outgrow a space it has leased or find itself unable to continue to cover the rent. If you find a subletter to take over your lease, you can save a considerable amount of money and possibly offer another business owner an exciting opportunity.

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Original Lessor's Responsibilities

If you sign a commercial lease, you are legally responsible for the provisions in that lease, even if your business fails and you find another company to take over the space. If the subletter fails to pay his rent, you are ultimately responsible for covering it, and if he damages or destroys the place and is unable to pay for the damage, you will bear that expense. Choose commercial subletters carefully in order to avoid unnecessary, expensive financial obligations.

Subletter's Responsibilities

A subletter is technically responsible for all of the provisions that he agrees to when he signs a sublease agreement, such as paying the rent and buying commercial insurance in an amount sufficient to cover potential damage he might cause to the property. In addition, he must adhere to all of the conditions of the sublease and the original lease, such as allowing the property owner entry on request and complying with relevant zoning restrictions. Although -- in theory -- signing a sublease agreement makes a subletter responsible for these terms and conditions, in practice, if a subletter defaults it will probably be cheaper for the original lease holder to pay the outstanding rent than to hire a lawyer to enforce a sublease agreement.

Lessor's Involvement

Any arrangement between an original lessee and a subletter of a commercial property is subject to the approval of the original lessor or property owner. A property owner has the right to meet with a potential subletter or perform a credit check before agreeing to a commercial property sublease. She has the right to refuse to allow a particular subletter to take over a space, even if the original lessee believes this subletter to be suitable. However it is usually in her interest to approve an interested subletter in order to keep the space occupied and increase the likelihood that she will continue receiving rent.

Sublease Fee

Most commercial leases include provisions requiring that an original lessee pay the property owner a fee for transferring his lease to a subletter. Subletting fees can be as much as half a month's rent, and are intended to compensate a property owner for the time and expense of screening potential subletters and preparing a formal sublease agreement. The original lessee is usually responsible for paying the commercial sublease fee, although he may negotiate to share the expense with the subletter as part of the subletting agreement.

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