Most Important Things to Know About Subleasing Your Space

I recently had a client come to me that had a problem with its subtenant.  The client had sublet its space and entered into a sublease, but the tenant had failed to pay the required rent and the landlord was threatening to evict the subtenant and sue the client and subtenant for the unpaid rent.

The sublease agreement was in proper form and contained all of the provisions necessary to protect the client’s interests. The problem was that the client had failed to monitor the subtenant’s compliance with the sublease and primary lease terms.  In addition, to make matters worse, the subtenant was claiming that it did not have the money to pay the rent and was judgment proof.

The moral of this story is that a sublandlord needs to treat a sublease the same as a primary lease and act as if it owns the premises.  Drafting a sublease is not difficult and an experienced attorney can prepare a sublease at a minimal cost. However, the provisions of the sublease are only helpful if they are properly enforced.  Accordingly, prior to entering into the sublease, the sublandlord needs to perform adequate due diligence on the subtenant to make sure it is creditworthy and otherwise a suitable tenant. After execution of the sublease, the sublandlord then needs to be proactive in making sure the subtenant complies with the sublease and the primary lease.  A checklist prepared by your attorney with respect to due diligence items and compliance matters may be helpful in this regard. The sublandlord should not simply rely on the primary landlord to monitor the subtenant and enforce the provisions of the primary lease. Otherwise, the subtenant may learn of any breaches by the subtenant after it is too late and the sublandlord has incurred significant liabilities to the landlord.  The inclusion in the sublease of provisions for the recovery of attorney’s fees and interest on damages are important to protect the sublandlord. However, such provisions will be of little help if the subtenant is judgment proof. As with most legal matters, consulting with an attorney before entering into the sublease and putting in place proper compliance procedures will help you avoid significant headaches and expense down the road.

If you have any sublease or lease issues, please do hesitate to contact Sugar Law LLC.

Copyright © 2019 Sugar Law LLC.  All Rights  Reserved.

Attorney Advertising.  This website is designed for general information only.  The information presented at this site should not be construed to be formal legal advice nor the formation of a lawyer/client relationship.