Sublease Advice For Landlords

When a tenant approaches you with a proposed sub-tenant, there are several things that a landlord ought to consider. Generally, as a landlord you are not obligated to accept a subtenant but will have the right to vet the proposed sublessee.

In contrast to a licence agreement, a sublease grants the subtenant exclusive occupancy rights to their designated area, generally providing them with their own exclusive possession, including their own key, for that section. You are somewhat de-risked by the fact that your tenant will be liable for the acts of the subtenant, provided the sublease is drafted correctly.

Our lease lawyers can provide advice and assist with preparing a sub-lease to ensure you are protected.

The important things to consider when subletting from a landlord’s perspective are:

The Viability of the Tenant

Assess business track record and the general financial capacity of the prospective subtenant. Although you have the protection of the tenant themselves guaranteeing their obligations, it is prudent to know that subtenant has financial substance to avoid headaches for everyone later should their business take longer to become viable.

Consistency with your Lease

Review the terms of the original lease as against the proposed sublease. Your lawyer is the person trained to do those for you. This is probably the most important consideration for a landlord. You need the heads lease to prevail. The sublease terms should deal with the rent, lease duration, and use of the property. It’s important to ensure that the sublease does not grant rights exceeding those in the original lease.

Consent Requirements

Your head lease may set out criteria by which you may assess the proposed sub-tenant. Otherwise, the lease may give you absolute discretion. At the very least, you should ask, is the tenant “respectable, responsible and solvent”?

Impact on Property

Consider the impact of the sublease on your property. This includes physical wear and tear, changes in the type of traffic or usage of the property, and any modifications the subtenant might want to make.

Legal and Regulatory Compliance

Ensure that the permitted use sublease complies with health and safety standards, any industry-specific regulations and zoning laws – for example is a permit required?

Insurance

Verify that adequate insurance is in place to cover any increased risks associated with the sublease and that otherwise covers all the actions of the subtenant. If you take out the insurance, the insurer will need to be notified. In any case, it is critical that make sure that the insurance is adequate and appropriate for the insured risk, to ensure that your asset remains protected.

The Sublease Document

Drafting the sublease documentation needs to be done by a lease lawyer who has experience specifically drafting sublease. At PCL Lawyer’s our lawyers will be watching out for traps and raise questions with you about further things to consider. We will also make sure that you are legally protected, including ensuring that the sublease is consistent with the original lease.

Our lease lawyers are very experienced at drafting, reviewing and amending subleases and we understand the specific complexities of different circumstances. We have extensive experience in handling lease disputes which will help you avoid the common issues that landlord’s experience in subletting.

Whether your property is a retail space, commercial or industrial premises we have the relevant legal know how and experience helping landlords protect their assets.

Get advice from an experienced sublease lawyers on 1300 907 335 or, alternatively, please complete the contact form on this page and we will respond to you promptly.