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Important Considerations in Subleasing Your Unused Office Space

Need to relocate, but having some issues getting out of your lease? Is your business downsizing because of the current environment and you need  to share some of the rent? If this is so, you might want to consider subleasing your unused space to other businesses. Engaging in a sublease agreement will definitely be a big help in your business’ cash flow. But before that, there are three important things that you need to know before doing a sublease.

First thing that you need to do is to find out if you are able to sublet. You can do this by checking your current lease agreement. Usually, there are specific clauses in the contract that do allow you to sublet; like twenty-five percent, for example. Just be mindful about the maximum allowable space that the contract allows. Subleasing more than the allowed limit allows the landlord to exercise his or her “right of recapture.” This means that the landlord can take back the unused space and have other businesses lease it directly from him or her. The commercial realty market also determines the landlord’s tendency to exercise this right. In a recent study conducted by U.S. realty market expert, Cushman and Wakefield, they have found that the office vacancy rates in major markets have decreased by around seventy-one percent within the last four years. It will also be a good idea to check with your landlord regarding options on the space that you don’t need.

Transferring out of a leased space is an entirely different deal. If you are moving out of leased space due to business decisions like cutting overhead costs, relocation, or even closing shop, your lease agreement may or may not allow you to do so. In these situations, it might always be better to have your landlord exercise his or her right to recapture the space. Doing so will avoid you the obligation of collecting rent from subtenants.

Second important consideration in doing a sublease is deciding on how much to charge. One very important consideration is that you might charge lower than your actual rent. This is because subtenants are always looking for the best bargains around. Moreover, in markets where commercial space is at a premium, charging higher than the landlord’s rent might see you splitting the lease with your landlord. It is always best to check your lease to see if there are clauses that  specify any sharing of rental amount; if you plan on renting out higher than your current lease.

The last consideration is finalizing an arrangement with your tenant. If you need to have some structural changes to accommodate a tenant would, of course, merit a higher rate. Also take note that any structural changes you plan to do must always adhere to the building code. Likewise, you also need to craft a contract for the tenant. Most of the time, the contract includes the percentage of the sublease of your space. Furthermore, some contracts also can alternately offer a “seat lease.” What this means is that instead of renting space, the subtenant rents a specific work station in your office. Always make sure that the contract includes other services that you offer like inclusion of internet access, receptionist services, use of the pantry, and use office equipment, to name a few.

As a final note, you don’t really have to create a sublease on your own. You can work with real estate agents who can ensure that the facilities and services you offer conforms to your current lease and whatever provisions you have in mind work to your and your subtenants’ best interests.

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