Legal and financial flexibility is crucial before signing a commercial real estate lease. A business’s needs always evolve, and you will want the option to sublet your office space.
Sublease & assignment clauses work in tandem. They legally allow you to transfer your lease obligations to another tenant or clear yourself from an office space should it no longer fit your needs.
These requirements vary from landlord to landlord. Consider speaking to an experienced commercial real estate broker to understand better the steps and procedures for subletting your space.
When you sublet your space, you act as the sub-lessor and transfer your leased space to a new tenant or sub-tenant.
Under a sublease agreement, the sub-tenant takes on the rights and obligations of the sub-lessor. Yet, the sub-lessor remains liable for all original lease obligations.
Most commercial leases for New York City office space (as well as loft, medical, retail, and showroom spaces) permit tenants to sublease their space. However, there can be caveats like:
- The sub-lessor can’t violate the “Use” clause. For example, a “Medical” tenant cannot sublet a “Showroom.”
- The right for a landlord to reject certain industries.
- The right for the landlord to reject a sub-lessor or sub-tenant with weak financials.
- The landlord’s right to a portion of subleasing profits.
- The “right of recapture,” or the landlord’s right to recapture control of the space.
- The sub-lessor must sublease the entire space, not a portion (however, they are often permitted to license a portion of their space to a licensee).
Commercial realtors work with sub-lessors to find a suitable sub-tenant and negotiate sublease terms. Attorneys then review the sublease agreement, fine-tune it, and send it to the landlord for their consent. However, sub-lessors always remain bound to the master lease.
The assignment clause enables you, as a tenant, to transfer your obligations under the lease to a new tenant.
In some cases, the new tenant assumes responsibility for the remaining lease term and signs a new contract directly with the landlord.
Of course, however, the landlord will verify that the new tenant is financially sound, creditworthy, reputable, and a good fit for the building.
Sublease and Assignment Clauses Are Essential Clauses of a Commercial Lease
Business conditions constantly change, and nobody has a crystal ball. Think of these sublease and assignment clauses as insurance for your business. These clauses offer you flexibility and protection should you one day need to sublease or assign your New York City office space.
Because the language of sublease and assignment clauses can be technical and complex, it is beneficial to have a qualified real estate attorney with extensive experience review it. It’s important that the language in the clauses prevents the landlord from unreasonably withholding consent.
If you have more questions about your sublease and assignment clauses, speak to an experienced commercial broker. The best ones will always put in the effort to negotiate favorable business and lease terms.
Contact Alan Rosinsky, Principal Broker of Metro Manhattan Office Space, Inc., for details regarding your right to sublease or assign your space.