When you need to cease operations at a leased commercial property temporarily, you may choose to sublease the property to a subtenant instead of breaking your lease. This way, you can avoid any penalties associated with terminating the lease early, and you can resume operations at a future date if you so choose.
Typically, whether or not you're entitled to sublease a property is established in your original lease agreement. If the lease agreement prohibits subletting the property, you may have to absorb the loss unless you can come to a deal with your landlord to amend the lease.
A Commercial Sublease Agreement is a legally-binding document establishing a sub-tenancy relationship between a tenant and a subtenant. Once the agreement is completed, the property's original tenant becomes the property's de facto sublandlord.
The agreement functions similarly to a lease agreement, except for payments being forwarded to the sublandlord rather than the property's manager or owner.
The sublandlord remains subject to the terms of the original lease agreement and is solely responsible for any damages, rent payments, and any other breach of the original contract. In other words, the sublandlord will have to indemnify the landlord from any breach of contract perpetrated by the subtenant.
Depending on your state, a Commercial Sublease Agreement may also be known as:
Commercial Sublease Contract
Commercial Sublease Form
Commercial Sublet Agreement
Typically, you use a Commercial Sublease Agreement when a property's tenant has time left on their original Lease Agreement but needs or wants to vacate the property before the agreement's end date. In that case, and with the landlord's permission, the tenant can seek a subtenant to the property while still making rent payments to the landlord.
Tenants may also choose to sublet only a portion of the property and continue to use the remaining.
A tenant may need to vacate or sublease a property for any number of reasons. Some common examples include:
The tenant is unable to afford the rent payments for the property any longer.
The tenant can't use the property for personal reasons.
The tenant runs a seasonal business and needs to manage costs during the off-season.
The space is too large for the tenant's business operations, and so subletting a part of it makes financial sense to share expenses.
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Commercial Sublease Agreements don't need to be complicated, but they can easily be invalidated. If the agreement conveys right to the subtenant that the sublandlord does not have under the Lease Agreement, the entire contract could be invalidated. With 360 Legal Forms, all you need to do is provide some necessary information about the lease and the parties involved, and we'll make sure your agreement is worded correctly.
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To create your document, please provide:
Landlord: The full name and address of the person who owns the property.
Sublandlord: The full name of the original tenant who entered into a master lease with the landlord and now subleases some or part of the property to a subtenant.
New Tenant: The full name of the new tenant (subtenant) of the property entering into a sublease with the sublandlord.
Premises: Full address and description of the leased property.
Term: The length of time for which the property is being subleased, usually expressed as a start and end date. This includes the nature of the term renewal and the timeframe of a periodic tenancy if it exists.
Original Lease: All 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 rules regarding improvements or alterations to the property.
Rent Details: The cash amount payable to the sublandlord every billing period. The utilities typically mirror the master lease in how they are handled.
Security Deposit: If required, the amount of security deposit collected should be written into the Sublease Agreement.
Base Rent: The minimum rent established in a lease with provisions allowing the landlord or sublandlord to increase the lease term's rent.
Holdover Rent: A rent rate applied if a subtenant remains on the property after the Sublease Agreement expires. This is usually a rate higher than the rent established in the Sublease Agreement.
Remedies: A contract clause explaining what the landlord can do if the lease is terminated by the tenant's inability to pay rent.
Event of Default: A condition that, if met, allows the sublandlord to demand immediate and full payment of the debt or take actions described in the Sublease Agreement.
Severability: A contract provision validating the contract even if one of the other conditions is unenforceable or illegal.
To be legally enforceable, a Commercial Sublease Agreement must be signed by the landlord, the tenant/sublandlord, and the subtenant. If notarized or witnessed, it should also carry the signatures of the notary public and witnesses.
Once the Commercial Sublease Agreement is signed and dated, distribute copies to the landlord, sublandlord, and subtenant. Each party should keep a signed copy for their records.
A Commercial Sublease Agreement does not need to be filed with any local recorder's office since it is a private contract. It's a good idea to keep a copy of both the master Lease Agreement and the Sublease Agreement in the same secure location.
In short, yes. Most lease agreements in the United States include a provision that forbids the tenant from subleasing the property. But if the Lease Agreement doesn’t mention subleasing, you’ll still need to obtain the landlord’s consent to sublease in writing.
It depends on your circumstances. A month-to-month automatic renewal tenancy offers more flexibility but it’s also easier for either party to terminate the tenancy. With a fixed-term agreement, you can reasonably assume a subtenant will remain for the duration of the term.
The subtenant has the right to see the terms of the original lease, so if requested, there’s no basis for you to deny it. It’s customary to include a copy of the Master Lease Agreement with the signed copy of the Commercial Sublease Agreement.
If a sublandlord is sufficiently insured to cover the subtenant, it’s safe to have an uninsured subtenant. However, it’s always strongly advised that both the sublandlord and subtenant have adequate liability insurance.
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