This is a commercial sublease agreement template detailing the subleasing of a commercial property by the sub-lessor to the sub-lessee. In essence, a sublease agreement can be used to rent out a retail space, a shop, an industrial space, or an office space.
However, a residential sublease agreement is different from a commercial sublease agreement; the former is used for residential properties such as apartments, condominiums, and houses.
Potential tenants can use the commercial sublease agreement template to sublease the entire property when an individual or corporation is still under a lease.
A commercial sublease agreement, also known as a commercial real estate sublease, is a form that allows the sublessor to rent out a specific part of a building where they are a tenant. This agreement is a binding contract with the original landlord - the party who exercises ownership.
Under the master lease, a landlord rents a specific place to a tenant (sublessor), who, in turn, sublets it to another third party (sublessee). In this case, the sublessee would be granted the right of possession (not ownership) for a specific period of time, as described in the agreement.
In every standard commercial sublease agreement, the property is subleased by a tenant (not the landlord) to another third party. And this is why it is known as a sublease and not a lease.
There are three parties involved in a commercial sublease agreement, and they are known as;
The Owner –– The landlord or party who manages the property. They exercise the right of ownership over the property.
The Sublessor — The party given the right to possess the property by the landlord or owner. The sublessor is the party subleasing the property in their possession to another. They review the application of the sublessee, handle negotiation with the sublessee, and accept responsibility for the sublessee under a commercial sublease agreement. The sublessor must obtain the landlord's consent before subletting a leased property.
The Sublessee — The party given the right to possess the leased property for a specific duration in a commercial sublease agreement. The sublessee is the party who will obtain possession of a subleased property from a sublessor.
When creating a commercial sublease agreement, there are a few things to keep in mind.
A commercial sublease agreement is essential because it legally protects the sublessor. Plus, it cuts down costs on a property, as subleases are normally cheaper than leases.
You will find the following information in our commercial sublease agreement template.
Details of the Property:
Here are five easy ways to sublet your commercial space without any hassle in the US.
You need to review the original lease on the commercial property before going ahead to sublet it. There are occasions where the master lease expressly prevents the original tenant from subletting. However, where the lease does not prescribe a term covering subletting in the standard commercial sublease agreement, then express permission from the owner is required.
Once it’s clear that the tenant has the right to sublet the property, they may go ahead and advertise the commercial space to the public with the hope of gaining interest. They may choose to employ the service of a broker to market the commercial sublease agreement or use various marketing channels such as social media. However, a broker may be less difficult to handle since they would manage the negotiating and closing processes.
Before drafting a commercial sublease form, always check the sublessee’s background. Ensure that they are physically, financially, and mentally capable of adhering to the terms of the commercial sublease agreement. This protects the sublessor and landlord from any future inconveniences.
A simple commercial sublease agreement should include all agreed-upon terms of the arrangement. These terms should be looked over by all the concerned parties.
The parties must accept the proposed sublease agreement sample containing the contractual terms and obligations in order to finalize the process.
The sublessor and sublessee can occupy a commercial unit after making all required initial payments as specified in the commercial sublease agreement. Also, the keys to the premises, closets, mailboxes, and private spaces will be handed to the sublessee.
A valid sublease agreement and the landlord's consent are necessary to sublet a commercial space. Notably, subleasing does not nullify a lease, as the tenant remains ultimately responsible for rent and the maintenance of the property.
To create a valid commercial sublease agreement template, the following information must be provided.
Below are the parties to a sublease agreement, and these details must be included in a commercial sublease agreement templates:
Landlord: The property owner or manager's full name and address.
Sub-landlord: The original tenants that entered into an original lease agreement with the landlord.
New tenant: The full name of the sublessee, that is, the new subtenant of the property.
For the description of leased premises, the commercial sublease agreement template must include the following:
Premises: The full address and description of the leased property.
Term: The duration of the sublease, the renewal of terms, and periodic tenancies.
The details of the original lease, including the start and end dates, the rights and obligations of both parties, and any additional clauses, such as the rules for improvements or alterations, are included in a standard commercial sublease agreement.
Rent details: At every billing period, a cash amount is payable to the sub-landlord. The sublease commonly addresses the utilities in the same way as the original lease.
Security deposit: A commercial sublease agreement should stipulate the amount for the security deposit if required.
The commercial sublease agreement template should include the following details:
Base rent: This is the minimum rent payable. It comes with the option for the landlord or sub-landlord to increase the rent during the lease term.
Holdover rent: After the commercial sublease agreement expires and a subtenant remains on the property, there’s a new rent rate. Sublease agreements usually prescribe a higher rent rate.
Remedies: The landlord may terminate the lease and evict the tenant if the tenant cannot pay rent.
Event of default: In the event of a default in the payment of rent, the sub-landlord can demand immediate payment of the debt or take action as stipulated in the sublease agreement.
Severability: The severability clause states that notwithstanding the invalidation of one or more parts of the agreement, the other conditions of the contract remain valid.
Certain risks are associated with having a sublease rather than an outright lease. When creating a commercial sublease agreement template, it’s important to have these points in mind.
The original tenant remains responsible for the payment of rent to the landlord, notwithstanding whether or not the subtenant fulfills their rental obligations. Management of risk can be done through a thorough screening process and clear contractual terms.
Another risk associated with subleasing is potential property damage or negligence by the subtenant. While the sublessor can seek compensation from the subtenant, per every standard commercial sublease agreement, they are still responsible for maintaining the condition of the property and adhering to the terms and conditions of the original lease.
If the master lease is terminated, or subletting is prohibited, the third party cannot sublet such commercial space. Simply put, you can't create a commercial sublease agreement in places where it's not allowed or where the main lease has ended. When such situations happen, the sublessor should review the terms and conditions of the lease and get consent from the landlord before entering into the commercial sublease agreement.
The legal and regulatory requirements of a sublease agreement are essential, although they vary by jurisdiction. Regardless, utmost compliance is important, or you could face legal consequences.
To understand the clauses in the agreement, you can book the service of a legal or real estate professional. And as a sublessor, we recommend you possess a copy of the original lease.
A commercial sublease agreement can be used when a part of the commercial premise or the entire property will be leased. Sublease agreements are used to rent out part of the premises while the landlord owns the rest.
If the lease does not specify whether or not a space or property can be sublet, consent can be obtained from the property manager or landlord.
A commercial sublease agreement is used when a tenant wants to rent out part or all of a commercial space they are renting to someone else. This could occur when:
In this case, the original tenant remains responsible to the original landlord, but the sublessee still takes on some rental obligations as specified in the commercial sublease agreement.
There are numerous occasions where it may not be suitable to enact a commercial sublease agreement. In such a case, it’s more advisable to seek other alternatives. Some of these instances are:
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For every commercial sublease agreement, if the sublessee does not pay the rent in due time, the landlord can begin eviction proceedings against the original tenant. If the sublessee owes several months of back rent, the original tenant will be held responsible for the debt, and the tenant must pay in full.
The original tenant is responsible for making sure the rental is in good shape, even though they do not live there.
A standard commercial sublease agreement can be terminated early, that is, before its expiration date, although some steps must be taken. Some are reviewing the terms of the commercial sublease form and negotiating with the landlord for an early termination.
If negotiation is impossible, you may invoke an early termination clause insofar as one exists in your commercial sublease agreement template. This clause typically outlines the circumstances under which either party can terminate the lease before its expiration date.
The required timeframe is usually specified in the commercial sublease agreement. However, in the absence of that, the original tenant should give the landlord 30 to 60 days before the intended start of the sublease. Where adequate notice is not given, the agreement may be rendered null and void.