An arrangement where a tenant leases part or all of its space to a third party (subtenant) while remaining responsible under the original lease with the landlord.
A sublease creates a separate tenancy between the original tenant (sublandlord) and the subtenant. The original lease remains in effect, and the original tenant retains all obligations to the landlord, including rent, CAM, and maintenance duties. The sublease term must be shorter than the remaining master lease term (otherwise it is treated as an assignment). Most commercial leases require landlord consent for subleasing and may include recapture rights or profit-sharing provisions on sublease income exceeding the original rent.
A tenant subleases excess space at market rates above its below-market lease rate. The landlord invokes a lease clause requiring 50% of all sublease profits to be paid to the landlord, significantly reducing the financial benefit of the sublease.
Review your lease for sublease consent requirements, recapture rights, and profit-sharing clauses before marketing the space. Negotiate these terms during the initial lease, not when you need to sublease. Remove profit-sharing clauses or cap them at a reasonable percentage.
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Find My OverchargesThis page provides general educational information. It is not legal advice and may not reflect the most current law in your state. Consult a licensed attorney for advice specific to your situation.
