What Is a Commercial Sublease Agreement, and Who Should Consider Subleasing?
It might be difficult to navigate and negotiate a business sublease arrangement. While residential subleases are probably familiar to you, business subleases require extra attention to detail and fine print. Having negotiated hundreds of sublease agreements on behalf of our clients, we at Add India Group are aware of how crucial it is that you have all the information you require before starting the subletting process for your space.
We define a commercial sublease agreement and discuss the pros and downsides of subleasing your space in this blog.
- What Is a Commercial Sublease Agreement
- Reasons You May Want to Sublease Your Commercial Space/Commercial Sublease Agreement
- Why is Commercial Sublease Agreement popular?
What Is a Commercial Sublease Agreement?
An agreement between a tenant who is already renting a property, a new tenant who is looking for space, and the property owner is known as a commercial sublease agreement.
When your commercial sublease agreement for your space, the new renter is the sublessee (or subtenant), and you are the sublessor (or sublandlord). For the duration of the remaining term on your lease, or for any longer period of time that is agreed upon—sometimes simply a fraction of the remaining lease term—the subtenant resides in your space, or a portion of it.
Generally speaking, you are still obligated to pay your rent as agreed upon, which means you have to continue collecting rent from your subtenant and sending your rent payment to the landlord each month.
Before deciding to sublet your space, make sure you have properly read your lease. To make sure there are no restrictions or consent concerns, you should be aware of your sublease rights before asking your landlord for permission. Landlords usually let you sublease your space, yet there are a few situations where they won’t.
When you’re prepared to sign a commercial sublease agreement for your space, you’ll need to market it to attract tenants and put it on the relevant commercial sublease agreement and real estate websites.
The subleasing procedure might go considerably more quickly and smoothly if a broker is hired. A broker can offer years of marketing expertise, ensure that your space is positioned competitively, and assist you in determining the optimum rate for it. A broker can also guide you through the difficult process of negotiating with your landlord and possible subtenants.
Reasons You May Want to Sublease Your Commercial Space/Commercial Sublease Agreement
Although it’s not always the best solution, we’ve discovered that subleasing can be a suitable choice for renters in the following circumstances:
1. It's time to reduce the size of your office
Are you utilising all of the space you have or is it too much? Subleasing is a fantastic choice if you need to downsize but still have some remaining lease time. You have the option of subleasing all or a portion of your space should you need to downsize.
Given the circumstances, some tenants choose to sublet a section of their existing workplace rather than deal with the hassles and costs of moving. This might be an easy process if you are in different floors or spaces. It’s also an option to sublet a portion of your space only. If your office is all in one area, you should be prepared to share your space with another business or incur additional building costs in order to divide the area. It’s critical to market your place appropriately, based on your aims.
However, you may want to sublet your entire space if you need to move out and find another location, or if you just no longer need an office space. If you need significantly different space or have less unused space, this is a viable alternative. The most popular method for commercial sublease agreement is this one.
2. Right now, you have more room than you require
Do you now have space that you don’t need but that you intend to utilise in the future? It can make sense to sign a lease for a larger area if your business is growing quickly, even though you might not use the entire space at first.
Letting someone else utilise the area you don’t need can help you save money and maintain your growth potential. Based on your anticipated expansion, you can look for a short-term subtenant. When you need the space again, you can retake it and extend your lease.
For high-growth businesses that have identified an area they wish to expand into over time, this is an excellent alternative. In this manner, if your business expands, it won’t need to move or find new space.
3. You no longer fit in your present location
Is your company expanding quickly? Do you have enough room left? Before your lease expires, you might have to relocate into a larger location and sublease your current one. Start-ups and other high-growth firms frequently experience this.
When your existing space becomes too small, you have two options: sublet it and move into a larger location, or you can lease more office space. If your staff is dispersed between two sites, leasing more space may cause division within your organisation. Depending on your workplace culture and dynamics, this may occasionally lead to problems with workflow and communication. Because of the inefficiencies of being divided, you are typically eventually taking up more space than you require (two break rooms, extra corridors, and maybe two different lease expirations).
You can save yourself from these problems and potentially even save money down the road by subletting your existing location and finding a new, adequately sized facility to handle development.
4. Your business is closing or moving
Finally, you could have to sublease your space if your business needs to abruptly move or close before your lease expires.
In these circumstances, you can avoid paying double rent or rent on unused space by subleasing your space.
Why is Commercial Sublease Agreement popular?
There are several reasons why commercial sublease agreement is so common. These are few of the most typical:
- Cost savings: Subtenants frequently have the ability to bargain for a cheaper rent than they would have to pay if they were renting business space straight from a landlord. This is because the landlord is willing to sublease the space at a lesser rate in order to make extra money because the head tenant is already paying rent to them.
- Flexibility: Compared to standard leases, commercial sublease agreements are frequently shorter, giving firms more freedom to expand or contract as needed. Businesses who are expanding quickly or are new to the area would particularly benefit from this.
- Access to a prime location: Subtenants who otherwise would not be able to afford it may be able to sublease commercial sublease agreement or space in a desirable location. This can be a really effective strategy for companies looking to establish a presence in a sought-after area.
- Reduced risk: Commercial sublease agreement can help landlords lower their risk. The landlord is still able to collect rent from the subtenant in the event that the head tenant fails on their term.
Conclusion
If your organisation is thinking of subleasing space or is looking for flexible, affordable office options, this article has given you a good starting point to understand the ins and outs of commercial sublease agreement in India. Hence, keep in mind that knowing the guidelines and advantages will help everyone—whether you’re looking for room to share or taking it—win.
For more information on commercial sublease agreement, visit us at www.addindiagroup.com
