Subleasing and assignment clauses are part of the many complex issues that will be dealt with under your commercial lease. While negotiating these lease terms will be the primary responsibility of your attorney, as an experienced commercial real estate tenant representative broker, Metro Manhattan Office Space will help you understand the basic requirements and protections you should be aware of and will work in cooperation with your attorney during lease term negotiations.

Subleasing

In a sublease, the existing tenant enters a contract with a third party to occupy all or a portion of its rental space. The new tenant takes on all the rights and obligations of the original tenant under the sublease agreement. Still, the original tenant remains liable for all obligations under the original lease.

Most commercial leases for New York City office space (as well as loft, medical, retail, and showroom space) permit tenants to sublease their space. However, sublease clauses vary from landlord to landlord, and generally, there are restrictions on the right to sublease. Commercial tenants need to obtain their landlord’s consent to sublease their space. The tenant’s attorney should negotiate that such consent shall not be unreasonably withheld under the lease agreement. Frequently the landlord has the right to share a portion of the tenant’s profit from subleasing. If the sublease clause contains the “right of recapture,” the landlord has a right at their discretion to recapture control of the space. Landlords generally prefer that the entire demised premises be sublet as opposed to merely a portion.

Assignment

Assignment of a commercial lease differs from a sublet. Lease assignment entails the original tenant transferring all its rights and interests under the lease to the new tenant for the remainder of the lease term. In some cases, the over tenant is released from liability to the landlord under the original lease. The new tenant assumes that responsibility for the remaining lease term and is in a contract directly with the landlord. Lease assignment presents more risk for the landlord than subletting, mainly if the original tenant is no longer liable under the lease. The new commercial tenant must show that it is financially capable of assuming all lease obligations, is creditworthy, is reputable, and is a good fit for the building, among other things.

The Importance Of Subleasing And Assignment Clauses In Your Commercial Office Lease

There are many reasons why you may one day need to sublease or assign your lease, particularly given the economic climate, so it is essential that you have a certain degree of flexibility should your business conditions require it. Subleasing and assignment clauses can be quite complex. It will be up to your attorney to negotiate the details, such as whether the new tenant assumes responsibility for the security deposit. The sublease clause should be worded in a manner that prevents the landlord from unreasonably withholding consent to a sublease agreement. Sublease clauses in commercial office and loft leases should clarify whether a corporate restructuring, death, divorce, gift, or sale of the company will constitute an assignment of lease.

In general, you must enter a fair lease with adequate protection for both landlord and tenant. Signing a landlord lease form that is not adequately negotiated can negatively impact your business and financial liability. You should make sure you have the necessary degree of flexibility under your lease concerning assignments and sublets should the needs of your business change during your lease term.

Ask us about your sublease and assignment rights. We will always work in cooperation with your attorney with the objective of negotiating favorable lease terms. We always have your tenant rights in mind.

Contact Alan Rosinsky, Principal Broker of Metro Manhattan Office Space, Inc., for details regarding your right to sublease or assign your space. 

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