What do you know about subleasing commercial property for rent, or industrial space for that matter? What you do not know might handicap you in the future, and the old adage, knowledge is power, could very well increase your profit line in the future. Isn’t that reason enough to read on?
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What is subleasing?
A sublease is when a tenant rents the property they’re renting to another tenant—essentially reassigning the lease. In most subleases, the tenant’s renter covers all or a majority of the property’s monthly rent payments. Subleasing can keep tenants from breaking their original lease while someone else pays their rent.
For example, a tenant’s job forces them to move before the end of their rental agreement. Subletting their rental can keep them from violating their rental agreement and eviction. The new tenant assumes responsibility for the rent amount.
Subleases are also called sublets. A property’s original tenant is called the sublessor or sublandlord and new tenants are sublessees or subtenants.
How could this benefit you?
There are many reasons why someone would want to sublease their commercial property for lease to someone else, but a shortage of capital is generally the motivating reason. It is quite common for a sublease to only be for a portion of the total property, as in partitioning off part of the property and only subleasing that portioned portion, thus cutting costs. And, as mentioned earlier, perhaps you are needing to move your business to a different location, something which happens quite often, but the lease requires you to stay longer than you want; in this case, you would simply sublet the property, go ahead and move to another location, thus keeping the lease intact.
Are you allowed to sublease on commercial property for rent?
There are many legal implications of subletting commercial property for rent for real estate investors.
First, it’s essential to note that laws about sublease agreements vary by state and city. You need to know the local laws and regulations where your rental property is located. You may want to consult a lawyer or law firm to make sure you understand what’s allowed and required of you as a landlord.
In New York City, for example, tenants in buildings with four or more units can sublet their apartments no matter what their original commercial property lease says. This rule doesn’t apply to co-ops and public housing, though.
Landlords should account for subletting in their original lease agreements with new tenants. If you don’t want to allow for subleasing and you’re not required by law to do so, make sure your contract states this.
If you’re OK with subleasing, then you should define the process and terms for subletting in your commercial property for rent rental agreement. Do you want to review potential subtenants? Or, you might require your signature on any contract between the sublessor and sublessee. You need to include details like these in your rental agreement.
Your legal rights and responsibilities as a landlord vary based on your rental property’s location. The smartest approach is to seek legal advice if you’re considering subletting your property.
Bottom line: if you are the owner of a rental property, enlist the aid of a lawyer in drawing up a lease contract, making sure subleasing is accounted for. If you are renting commercial property for lease, try to find property where subleasing is allowed. You may not need it now, but protect yourself, and give yourself the option, for the future.
A final word about RDS Real Estate.
RDS Real Estate is locally owned and operated. If it is happening in the Greater Fort Worth Metro area, we know about it. Call us today and tell us what you need. Then, turn us loose to do what we do best. With over three million square feet of industrial space and commercial property for rent, we are confident we can find what you need.