A sublease is a secondary lease agreement between the primary tenant who holds the lease to a Canberra commercial property who leases it out to a subtenant. There are many benefits to sublease your space to a tenant. Being a sublessor means you are able to fill any empty spaces and help the cost of your lease. So here is a summary of what you need before, during and after subleasing your commercial property.
It is a legal requirement to have your landlord’s approval before subletting your commercial space. As a sublessor, you will need to have permission to sublet as terms contained within your own lease. Even if your lease doesn’t explicitly prohibit subleasing, it still doesn’t specifically allow it either. As such you will need to consider whether or not you’re interested in subleasing before signing your lease, or you will need to approach the landlord for permission and ideally get that permission in writing. If this permission is not expressly given this may be grounds for eviction, so make sure to keep this in mind when first signing the lease, and ask your commercial property agent for advice.
In a sublease, the sublessee (secondary tenant) pays their rent to the sublessor (original tenant). They may either share the rented space with the sublessor or take over the entire space; they don’t pay rent directly to the landlord. But ultimately the sublessor remains legally responsible for the rent payments to the landlord under the terms of the original lease. Making it the sublessor’s responsibility if the sublessee doesn’t pay the rent. This is why it is important to screen your potential subtenant. This can be done through an interview process and a complete look at all necessary paperwork and details. We recommend taking an in-depth look at your potential sublessee’s credit report before entering into a sublease with them.
Also, state rules on the cost of rent vary from state to state so be sure to double-check before you try to turn a profit on the arrangement.
Damage and Repair Responsibilities
Much like with the rent, the original tenant or sublessor holds legal responsibility for the cost of repairs. Meaning if the sublessee damages the property the original tenant may have to cover the cost unless this is addressed in the terms of the sublease. Even then, in a worst-case scenario, where the lessee refuses to pay for damages the sublessor remains responsible for the damage under his original contract or lease with the landlord. Ultimately the original lease will supersede a sublease, as it is more of a private agreement between the two parties.
A sublessee cannot be assigned legal rights by a sublessor unless stated under the terms of their own original lease or rental arrangement with the landlord. For example, if the leased space is in a complex with assigned parking spots, the sublessor can’t grant more parking spots than they have a right to under the terms of their original lease—although they are within their rights to give less.
Subleasing can be a wise and profitable move in commercial real estate, but if you plan on subletting your space be sure to plan ahead of time and find a sublessee you trust.