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The challenges of a sublease


Kelly MacsymicWe as agents often take for granted that tenants and landlords understand the terms that relate to leasing and selling commercial real estate. One such common clause is that of subleasing.

It’s important that both parties in the lease agreement understand the obligations and implications of executing a sublease.

How does a sublease work?

Terminology to be cognizant of in a sublease includes the sublandlord (current tenant) and subtenant (incoming tenant). The head lease is the original lease signed by the current tenant; the subtenant coming into the space must agree to adhere to all the obligations of this agreement.

A sublease allows the sublandlord to find another tenancy for the space. The sublandlord may have several reasons to need a subtenancy such as closing up their business or relocating prior to the end of their term.

This allows the sublandlord to make good on their rental commitments to the landlord by essentially allowing another tenant to make up the rent. The subtenant becomes their responsibility and the sublandlord remains the principle point of contact for the landlord.

Typically, the landlord has no negotiation in this relationship. They will want to know as much information as possible about the subtenant. They must also approve and oversee all paperwork but that is where their input generally ends.

Am I eligible for a sublease?

The lease typically states whether the landlord will entertain a sublease. Even so, there are a few things to consider.

Firstly, the tenancy must be in good standing with the landlord. If there is any current defaults on the lease, such as outstanding rent, a landlord can deny a sublease.

Secondly, the subtenant coming into the space must be a good fit for the landlord’s mix of tenancies. Typically, the same use would be most ideal, but if the incoming business is not doing the same thing, the landlord needs to ensure it doesn’t conflict with any other existing tenancies.

There may be exclusions for some uses in the building the landlord cannot accept.

Put it on paper

Once the landlord has agreed to the subtenancy, all parties need to execute the agreement on paper. The head lease should form part of the agreement as a whole.

A sublandlord should get a deposit to hold against the subtenant like a regular lease transaction. To find out more about how a sublease works, be sure to reach out to your commercial real estate agent to get some help!

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Kelly Macsymic

About the Author ()

I am a gal of all trades and wear a few hats at my current job though nothing quite as esteemed as my 1996 Unity Western Days Rodeo Queen crowned cowboy hat. I spend my time as a sales and leasing agent at ICR Commercial Real Estate (ICR), in addition to my other gig as general sidekick and business manager for Barry Stuart at B. Stuart P.C. Inc. I started my journey in the small town of Unity, SK. My grandmother encouraged me to create mock newspapers which I, like any good keener, produced in abundance. My early publication days came to a quick end when I broke the news in one of these homemade papers with word of a surprise birthday party for my grandfather, and proudly presented it to him. Undaunted, I pursued the news bug all the way to Lethbridge College and was gainfully employed for several years in weekly papers in rural Saskatchewan. After a few adventures at the University of Regina and abroad in England, opportunity knocked and I accepted the chance to move to Saskatoon. I landed at Barry’s doorstep and have since been taken under his wing. He’s shown me the ropes at ICR through his most capable hands as one of ICR’s top producers. We are a dynamic team. I relish the challenges (most of the time) he throws at me daily. My other commitments include BPW (Business and Professional Women) Saskatoon in addition to volunteering as president of the Holliston Community Association.

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