Get Permission for Sublet Before Making Promises

May 12, 2016
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Subletting your space can be a good option under a variety of circumstances: A better location for your business has popped up before your current lease will come to an end; your sales are suffering and you need to downsize; or your business model is shifting from a retail storefront to primarily online sales. Your lease provisions regarding subletting will determine if and how you can sublet. So, before making plans to sublet, the very first thing you should do is check your lease with the owner to ensure that you have the right to sublet at all. Depending on the terms of the “master lease,” the owner might require prior notice or consent, or may have the right to recapture that space—that is, take it back.

But what if the master lease says nothing about subletting? If the lease is silent on the subject, you can assume that you can sublet without owner consent. However, you should always notify the owner of your intent to sublet, even if the lease says nothing on the subject. If you anticipate that there could be a problem, be proactive in communicating your plans to prevent unexpected conflicts down the road and unfulfilled promises to a prospective new tenant that thought it would be able to use the space through a sublease with you.

Remember that your subtenant will want your owner to know, for its own practical purposes. If you, as the tenant, default on your lease, your subtenant may want the right to cure your default or protect its interest under the sublease even though there is no relationship directly between the subtenant and your owner.

For tips on how to be sure that the arrangement with the replacement business for your space doesn’t conflict with your rights and responsibilities to the shopping center’s owner, see “Make Sublet Deal Work for You,” available to subscribers here.