A commercial sublease allows both sublessor and sublessee to maximize available resources for mutual benefit. Both can help the other party benefit not only financially but also strategically.
Using a rental agreement has advantages for both the prime lease tenant and subtenant. However, you should also be wary of its cons.
When the original or prime tenant rents out a part of a commercial property, this is called a commercial sublease. The tenant will now act as a “sublandlord” in the commercial lease template and will enforce the third-party agreement.
To distinguish between the two contracts involved, you may refer to the following definitions:
The pros and cons of a commercial sublease are listed below. Take time to read them to make sure this type of lease is right for you.
Step 1 — Get a copy of the prime (original) agreement.
Once you have a photocopy of the prime lease, you can attach it to the commercial sublease agreement. Then, on your own copy, you may highlight crucial provisions. This will guide you when drafting the sublease agreement.
Step 2 — Ask for the landlord’s consent.
Check if the prime lease has guidelines on subleasing. Alternatively, you may ask the original landlord then let him or her sign a written consent form, which is included in the free sublease agreement below. If you fail to get permission, the landlord may contest the sublease or cancel the prime lease.
Step 3 — Calculate the rent.
Based on your existing rent per square feet, calculate how much you should charge for a smaller space or unit. To calculate this, you may refer to the formula below:
Prime lease’s Price per Square Feet ($/sqft.) x total square feet (sqft.) of the smaller unit
= Monthly rent for the subleased unit
Step 4 — Prepare the unit.
The unit must be in top shape so that you can get inquiries. After making repairs, you may take pictures. In a commercial sublease, it is usually better to leave the space unfurnished. Businesses usually have their own preference for the set-up, so the subtenant may want a blank canvas.
Step 5 — Find a subtenant.
List the space online or in a local newspaper. Once you get inquiries, make sure to filter subtenants. It is important to consider their line of business and sales projection. As the master lease tenant, you must also ensure that subtenants’ businesses do not compete with each other.
Step 6 — Finalize the sublease contract.
Using the commercial sublease agreement template below, you may now go over the provisions with your subtenant. Once everything is agreed, you may finalize the contract by signing and having it notarized.
Step 1 – Download the file below.
Below, choose the file type that matches your pre-installed format.
Once the file opens, you’re good to go. You may then proceed to the next step.
Otherwise, if the sublease contract’s file fails to open, you’ll need to download and install any of the following:
Step 2— Complete the opening declaration.
On the first page of the commercial sublease agreement, type the following details:
On the next page of the agreement, you’ll also have to input the same details in the following sequence:
Step 3— Fill in the recitals.
Likewise, you’ll also have to input some details that reference back to the prime lease.
Step 4— Read the fixed provisions of the sublease.
Sections one and two are standard across most sublease contracts. Still, it is crucial to read and check them.
Step 5— Write the details of the lease term.
Note: You may ask for a security deposit from the subtenant. Just in case anything happens to the commercial space or the property, a security deposit of up to 150% can cover any repair cost or unpaid rent if the subtenant leaves prematurely. By the end of the term, the sublandlord must return this to the subtenant.
Step 6— Finalize the rent payment details.
Step 7— Review sections 5 to 14.
It is common for any lease agreement to have fixed sections regarding the primary lease. These are incorporated into the free sublease agreement template for the protection of the landlord, the sublandlord, and the subtenant. Once you have read and reviewed the following paragraphs, it is best to consult your legal counsel.
Step 8— Write the contact details for correspondence.
Both the master lease tenant and the subtenant must properly document any critical communication between them. Therefore, section 15 must contain their contact details. On the space provided, write the following:
Step 9— Check sections 16 to 19.
The provisions in sections 16 to 19 are, once again, standard in any sublease agreement. Make sure you still check if you agree to everything.
Step 10— Sign the sublease agreement (sublandlord and subtenant only).
Once the primary tenant and the subtenant agree to all the terms, they must indicate the following details:
Note: The signatures of the primary tenant and the subtenant should also be affixed on each page of the sublease agreement.
Step 11— Acquire consent to sublease.
Most original leases (or “prime leases”) require the tenants to get the permission of the landlord. Though some states do not implement this strictly, you may need to at least inform the property owner or original landlord. In this section, fill out the blanks as follows:
Step 12— Add attachments.
For the next pages of the contract, you may attach the master lease, an inspection form, or a property location map. In addition, you may want to attach some house rules for the subtenant. You may also add any relevant correspondence between the original landlord and the sublandlord like changes to the contract or new rules.
Though a sublease can be more detailed than regular lease agreements, it can benefit both the sublandlord and the sublessee. This third-party contract can give their businesses a strategic advantage not only financially, but also in terms of marketing and some business operations.