Curious how exactly a Sublease works?

sublease

As the sharing economy continues to grow and take hold in the business world, so have new ideas about how we manage and share our spaces. It has become ever more common for businesses to be mobile; often renting an office that has extra unused space, or only occupying their office a few days a week. Because of these new trends, combined with the rising cost of real-estate, it has become more practical and prudent for businesses to make the most out of their work environment – often sharing their space with similar companies is the answer.

Recently, we’ve had a number of inquires into subleasing a space, how it works, and if it’s right choice for them. Most individuals are much more accustomed to signing the leasing papers, not drafting them. Today, we’re going to go over some of the basics of a sublease, the pros and cons, while providing some examples.

1. What is a sublease, and when do I use it?

Example sublease for download

A sublease is a formal agreement between two parties, where one individual, who is currently leasing a space, confers usage agreement to a 3rd party for a portion of said space, for an agreed upon price. Subleases can be incredibly variable in duration, with schedules allowing for anywhere from 1 day a week access, to 24/7 usage for weeks or months at a time. Furthermore, the terms and conditions of a sublease are incredibly flexible – with the controlling party able to create a document that perfectly suits their needs, though this may alienate potential sub-leasers if it is too restrictive.

The purpose of a sublease is to maximize the profits obtainable from an unused, or under-used piece of a property. For example, you lead a 5-man office, and the space which you rent has an extra conference room with 4 desks. Your team never uses it, and as it is it takes up space. Areas like this can be subleased to a 3rd party and save you huge amounts on your monthly rent!

2. What are the terms like, and how flexible is a sublease?

One of the biggest selling points to subleasing a space is just how flexible you can make the terms. Whereas with the original lease, your company is likely bound to the location for several months, if not over a year before changes can be made in the terms, subleases are often managed on month to month, or 3 month duration.

This is one of the reasons a sublease can be so attractive to small businesses, the increased income allows them to grow and save money – once enough growth has happened (Be it a month or 6) the flexible terms of the sublease allows them to take their space back to accommodate their growing business. It really is a win-win!

3. So what are some of the downsides and limitations?

The biggest thing before looking into a sublease is looking over your original lease and the terms outlined within it. Always check to see if your lease allows for subleasing (As a side note, this is a great feature to shoot for whenever signing a leasing agreement) and to make sure that there are no special conditions attached. Some landlords might have provisions that ask for half of whatever you make off the sublease, because of this individuals with strict leases will have to consider the pros and cons before entering an agreement.

Finally, always be aware of how the chain of liability works. If your subleaser goes missing, and doesn’t pay his/her rent for a month or two, you are still liable to your landlord for the rent. That being said, it is always wise to be confident in the individuals you agree to sublease to; small businesses and teams are very reliable.

Subleasing your space is often about more than the money – it provides an excellent networking opportunity, and allows your business to bounce ideas off other individuals. Have a space that you’re interesting in subleasing or want to learn more? Contact us @shareyouroffice and we’ll guide you through the process every step of the way!

Note: Please consult an attorney before drafting any legal document, the examples above are merely  to be used for guidance purposes.