Commercial Subleases

Commercial Subleases

How to Avoid Getting Burned

Your Sublease Is As Weak As Your Sub-Landlord

Before you think about subletting or subleasing space from a preexisting tenant, remember, your sublease is only as strong as he is. If he defaults on the main lease, you lose your right of occupancy and the primary landlord can evict you or hold you to ransom for much higher rent. How might this happen? Well, it is simple. You pay rents to the sub-landlord, who being in financial straits, pays other bills with it instead of paying it on to the primary landlord (Of course he's in trouble. Otherwise, why would he need to sublease at all?). Sub-landlords are notorious for impounding or diverting rents. It is far better to work out a system whereby you pay your sub-rent to the landlord directly. That way, you can make sure it actually gets there.

Another common problem revolves around not getting approval for the sublease from the owner or primary landlord. Nearly all leases forbid assignment or subletting without first obtaining landlord consent. So if you do a sublease deal without this, the sublandlord will be in default under his lease, and the landlord can evict him along with you. Make sure the sublease is signed by the primary landlord in addition to the sublandlord. It is nearly always a three party deal. The documentation should reflect that.

A third common reason subleases can get you into trouble is that the sublease may not contain all the detail of the primary lease, although it may state that you are responsible for anything in it as if you were the tenant under that lease. Perhaps your rent is lower than the rent in that lease, but otherwise you have to obey everything in it. Then you find out that it contains huge common area maintenance (CAM) charges which you must pay, or any number of other nasty surprises, including the landlord's right (common in commercial leases) to relocate you to a different space if he wants to, despite the money, time or goodwill you have put into your current lease space. Watch out for this, and always get a copy of the primary lease before executing a sublease. If you are facing a sublease or considering subletting, call us for a free consultation.

Call a Denver business lawyer at The Vasilco Law Group, P.C. today for your free telephone consultation.