“Understanding How to Sublet a Retail Space for Rent” written by Mike Marko
Is your tenant planning to sublet your retail space for rent?
Do you want the tenant to sublet the unit or do you want to be in control of the sublet process?
Subletting is a common clause on most commercial properties. Subletting, when allowed, lets the tenant find a renter to complete their lease term without violating or breaking the original lease agreement.
Tenants sublet their rented unit to avoid breaking the lease agreement. Moreover, it is also used if the tenant wants to earn money from a vacant space on their rented property.
In this article, we’ll help you get a better understanding of what subleasing is, what its benefits are, and how you can sublet your retail space for rent.
Subletting a Retail Space for Rent
Just as you would in trying out something new that poses a few risks, you should have a clear idea on what subleasing is and how it works before allowing it. Otherwise, multiple problems may arise within your building, and possibly your whole renting business.
Today, we will discuss the basics of subleasing and the different procedures involved in subletting a retail space for rent.
What is a Sublease?
A sublease is the lending or transferring of a tenant’s lease (who may be moving out of the property or will be away for a long time) rights and responsibilities to a third-party user of his/her rented space, who will then be known as the “subtenant”.
If you have a sublease clause in your agreement, it’s better to discuss it in detail prior to the tenant subletting the rental. To avoid any issues while allowing a sublet it is highly recommended that you require the subtenant or party being considered for the sublease go through all the background and credit check process and be approved by the property manager, before allowing them to sublet the property to the new tenant.
It is best to be specificity on your terms can help you avoid sub-tenancy problems.
When Is a Sublease Recommended?
Allowing a subletting clause to the rental contract is recommended when renting a retail space for rent. It is common for big retail stores to lease corners of their facility to smaller retail locations to help to offset rents. Allowing a new business or startups to sublet part of their rental space helps them budget needed capital to pay rents, and helps them to cut real estate costs by sharing an office with other entrepreneurs.
Why Sublet a Retail Space?
If you have never allowed subletting of your commercial properties then you could be asking: “How can subletting benefit my tenants or my rental property business?”
Besides allowing the current tenant more flexibility in completing the rental terms of their lease subletting also offers the following benefits that may convince you to allow subletting of your property:
Property Managers’ Benefits
As the property manager are assured the following:
- Increase in revenue since rents will be paid throughout the term of the agreement.
- Lease breaks are kept to a minimum,
- Reduced unoccupancy rate.
Tenants’ and Subtenants’ Benefits
Meanwhile, on your tenants’ end, both them and their subtenants can:
- Share partial rights of the rented space,
- Share resources and expenses,
- Share and gain customers,
- Gain networking,
- Reduce carbon footprint,
- Have workplace diversity.
Types of Sublease Clauses
Whether subletting a property will be allowed or not, the final decision still depends on the property manager. Should you agree to the arrangement, know that there are certain types of subletting clauses you can use for your retail space for rent.
No Sublease Clause
There are many lease agreements that do not contain a sublease clause. Most states—except for Texas—entitles a tenant for sublease, even without their property manager’s permission. If a tenant attempts to sublet without a subletting clause then you have the legal rights to deny this process and get the rental courts involved to stop the subletting from happening.
You are the owner of the property, and no tenant should sublease their rented space without your consent. When the time comes that they wish to do so, you can reopen the issue and discuss your subleasing terms. normally you will require the potential subletting party to go through the normal tenant background, credit screening processes to qualify for the ability to sublet the property
Landlord’s Reasonable Consent to a Sublease
Leases allow subletting, with or without the property manager’s permission, provided that he has given a reasonable evaluation on the proposed sublease. This process is necessary since the court has a fairly uniform way of checking if he has reasonably acted upon subtenant evaluation.
A rental or lease agreement with a reasonable consent to sublease clause should contain these four conditions:
- The subtenant must successfully complete all tenant screening processes and be approved by the property manager for subletting.
- The subtenant should be financially stable.
- The subtenant should abide by the landlord’s rules and plans as to how the property is used.
- The subtenant should have a clean criminal record.
Steps to Subletting a Retail Space for Rent
Following a consistent procedure will help you and your tenant’s breeze through subletting transactions smoothly. The following are the steps to consider when you decide to sublet your retail space for rent.
Refer to the Rental Lease Agreement
The first thing you should reference is your rental agreement. If subletting is within the terms, then be specific if the tenants need your permission to sublet their rented space. Otherwise, let them know, and inform them about their other options.
Require Prior Notice
Subleasing at a moment’s notice is considered unprofessional and should never be allowed. Normally subletting will require background and credit checks to qualify and these processes take time to complete. Thus, it is best to require an advance notice and document this requirement in the rental lease agreement from your tenants if they are planning to transfer or share their rights to a subtenant. Make sure that your tenants will adhere to the notice time both of you have agreed upon.
Choose Subtenants Carefully
Your tenants should be just as careful as you are in choosing who will rent a part of your property. Since they hold full responsibility for anything that might happen in their rented space, you should require them to perform a thorough screening on their potential subtenants.
Another thing to point out is contract termination is within reach, in case your tenant or their subtenant neglects or violates any of your house rules.
Commercial Sublease Agreement Drafting and Signing
After the screening, tenants or the property manager must next draft a Commercial Sublease Agreement that mirrors your original terms with the original tenant. This agreement must address the conditions of the subtenancy. Of course, the tenant has options to add several clauses that do not violate your original terms.
Make sure to discuss and review the proposed agreement before finalizing and signing it. Upon acceptance of the conditions, your tenants will then act as the sublandlord, shouldering the responsibilities of their subtenants.
Final Reminders to All Renters
When considering subletting part of your property you must always keep in mind that all of your rights and responsibilities for renting are also agreed to and taken up by sublet tenants.
Think of a sublet like an extended family living under one roof, with you, the property manager, as a new grandparent. Even though your children now have a huge responsibility as parents to their child, that doesn’t mean they can already forget about you. The same goes for subleasing a retail space for rent.
Notify your tenants that they are held liable for their subtenants’ responsibilities and obligations to you, and all parties now have a legal relationship with one another.
Final Thoughts on Understanding Sublease Clauses in a Retail Space for Rent
Today, we’ve talked about what a sublease is, what its benefits are, and how you can effectively sublet your property.
A sublease allows your tenants to share or transfer their obligations and responsibilities to the retail space for rent. Having this clause is beneficial for your business as it helps minimize the instances of lease breaks and may increase revenue.
Before subletting your property, tenants must provide prior notice and screen their potential subtenants. After which, an agreement must be made between all involved parties to ensure smooth transactions and a healthy landlord-tenant-subtenant relationship.
As for your original tenant, they’ll act as the sublandlord. They hold upon their shoulders all of the sub-tenants’ responsibilities and obligations to you. Should any violations or term neglections arise during sub-tenancy, they shall be held accountable for all the damages done.
If you have any more concerns regarding subletting a retail space for rent, you can leave your questions below.
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