Before a master tenant can sublease commercial property, some important questions should be answered. First, the master lessor has to ask for and receive approval from the landlord to sublease commercial space to a third party. Without that, space shouldn’t be subleased. The language of the original lease should also be read thoroughly to ensure that any restrictions about signing a commercial sublease agreement with another business are adhered to. Beyond that, there are some important questions that the master tenant has to ask of a third party interested in subleasing commercial space. Here are some of the most important:
What will the space be used for?
Before the master tenant signs a commercial sublease agreement with a third party, it’s critical to determine what kind of business the sublessor will be conducting. Beyond weeding out individuals who intend to use the subleased space for questionable purposes, it’s critical to find out if there will be any activity taking place within the subleased space that could get the master tenant in trouble with the landlord. For example, if the sublessor decides to operate an adult entertainment club on the premises, this could cause the master tenant to be in default of their lease with regard to any language in the agreement about permitted uses of the premises. Likewise, if the sublessor is in the business of distributing hazardous materials, this could kick up a lot of dust with local authorities — not to mention the potential damage to the property that could come as a direct result. It’s okay for a master tenant to be discriminating, especially if the activities of the sublessor could result in these kinds of issues.
Are there any special electrical needs the sublessor will need in the course of its regular business operations?
Before subleasing commercial space, it’s a master tenant’s responsibility to find out if the sublessor’s electrical needs could cause problems for other tenants sharing the facility. Businesses that operate high-powered equipment should only be considered if the property they’re subleasing was intended for that express purpose. Also, don’t forget that most office lease agreements specify caps in electricity use. If a master tenant agrees to sublease commercial property to a company that either operates around the clock or will be using an inordinate amount of electricity, the master tenant could find themselves in the unenviable position of having to pay a massive bill for electricity overages. Most of the time, these types of restrictions will be spelled out in the section of the master lease that speaks to commercial sublease agreements.
Will there be a need for an early sublease termination clause?
If so, it’s vital to clearly declare any associated penalties or fees in the written sublease agreement to avoid confusion and to ensure both parties are clear on what will be required for the sublessor to exit the contract early.
How many parking spaces will the sublessor require for regular operations?
If a master tenant intends to sublease commercial property to a business whose need for parking outweighs what’s available, this could be a deal breaker. If parking is scarce but the sublessor is okay with that, it’s still important for the master tenant to determine if it’s possible the business will create an undesirable parking situation by taking up more than a fair share of the allotted space. This is especially important if the parking lot is shared with other businesses.
Other Considerations
If you’re the master tenant and you want to sublease commercial property, ensure there’s no ambiguity in the agreement. Spell out what will be included with the subleased space, and cover your interests by taking pictures of the property before the subtenant moves in. This will come in handy in the event you ever have to go to court to recover damages caused by the sublessor.
