Subleasing office space can offer a more superior building at a lower monthly rent, providing the Tenant the ability to be in the building they desire without the hefty price tag, flexibility of a shorter term and even use of existing furniture.
There are rights a Tenant, who decides to sublease their space, gives up when subleasing their space. These “rights” are usually located in the “Sublease” clause in the lease between the Landlord and Tenant.
Two main examples of building signage and an option to renew the lease.
- Right of building signage is more common for a Tenant who is leasing at least a full floor of a building.
- Renewal options are more common in every lease. A renewal could say, “Tenant has a one time option to renew their lease at the current market rate.” If the Tenant decides to sublease their space, majority of the time, the option of the renewal is not passed through to the Sublease.
What does this mean for a Subtenant?
Any terms that were agreed upon for a renewal, the Subtenant does not have a right to and is subject to whatever the current market rate and how the Landlord is marketing the building.
There are two potential issue could arise when not having a renewal option:
- A Tenant in the building could have First Right of Offer to the said sublease space at the end of the term, this Tenant has first position and priority over the Subtenant, to lease the space.
- The current market rate could be higher than the Subtenant’s budget. If the Subtenant would like to move into a relationship as Tenant to the Landlord but cannot afford a direct deal the Subtenant will have to relocate.
Having a Tenant Representative can bring clarity when evaluating the best decision for your business to choose a sublease or a lease a space directly