Subleasing

During a time like this, it may become necessary for some businesses to look at the option of reducing their monthly costs.  Aside from downsizing, which involves having to be released from your existing lease early, as well as moving costs, set up costs, and business interruption; another effective way of reducing overheads is to look at the option of subletting a part, or all, or their business premises to another tenant, thereby providing relief to their own cash flow.

First, what is Subleasing?

Sub-leasing is the process by which an existing lease holder, sub-leases a portion of their existing premises to another party/business, making them a sub-lease holder, or a sub-lessee.  

It is important to note that the obligations of the original lease holder (sometimes calledthe sub-lessor) remain intact.  This means that even if the sub-lessee fails to pay rent, the sub-lessor (original lease holder) remains liable for rent and other costs to the landlord.

So, what are the practicalities and process of subletting?

In many regards the process remains the same.  The space would be advertised, prospective sub-tenants would view, and potentially agree to a sub-lease.

The main points that are dissimilar to a standard leasing process are the following;

• Landlords must give permission for the tenant to sublease the property.  Most leases already have a section regarding subletting.  If your lease does not have a subletting clause, you can always discuss the option with your landlord.

• The tenant (original leaseholder and sub-lessor) will be liable for the costs normally associated with being a landlord.  Some of these are; any commissions due, tenant installations, and any other costs that arises from the sub-lease.

• The original lease-holder remains responsible for rental and damages, and the Landlord still has final say on whether the potential sub-tenant will be accepted

In closing, subleasing can be an effective method to reduce your overheads in the short or long term, and can also be more cost effective than downsizing and having to move to another premises.  Subleasing is especially useful if you feel your business will grow into the space again.

For any assistance on sub-leasing, or any other property queries, please contact ANVIL Property Smith