As a business, circumstances will not always remain the same, so you may find yourself needing to move from your current commercial space. Whether this is because you need a bigger or smaller space—perhaps even no space at all—the fact is that finding someone else to sublet the space will be the best option available to you. However, as a tenant, subletting can be difficult, especially as not all landlords will be happy about such a turn of events.
At Roger Hannah & Co, our commercial property agents can help guide you through every step of the letter process. Even when you may need to sublet or leave the agreement for whatever reason,. For that reason, we have put together a comprehensive guide to help you navigate these confusing waters:
Check Your Restrictions
Depending on your landlord, there may be a number of restrictions regarding your ability to sublet as a tenant. Common restrictions that a commercial landlord will have in regards to subletting include:
- No subletting to other building tenants: though a good prospect for you, your landlord may feel otherwise about one tenant having a larger proportion of the building. Especially if they are also letting from a competing landlord in the same building. If your landlord owns both commercial properties, then this may be a more acceptable possibility.
- No net rate discounts: this means that you cannot offer to sublet a space at a discount. Which basically means that your landlord needs to receive the same amount of money, regardless of whether you rent it yourself or sublet. You could still offer a discount, but you would have to pay the difference to your landlord. Saving the subletter money but not yourself.
- No subletting to the landlord’s own prospects: if the landlord is currently negotiating with a third party, then you cannot then approach them to sublet your property. Though again, this may work in your landlord’s favour, as if you do sublet to this party initially, they may be willing to take on a new rental agreement after your own comes to an end.
- No profit—unfortunately, you are unable to make a profit when subletting a space. The maximum rent you can charge is the payment you make to your landlord each month.
However, you can ask for a guarantee from the new client, i.e., a rent deposit, guarantor, or bank agreement, in order to ensure you do not lose out if they fail to pay rent. This is especially important, as you are still responsible for paying rent and other fees even if they fail to do so.
Deed of Assignment
In order to legally sublet your commercial lease, you may need to acquire a Deed of Assignment (or a Sublease) in order to go through with a sublease. This often needs to be prepared by your landlord’s solicitors and you may very well be required to pay the fees for this to happen. This may also require an Authorised Guarantee Agreement to guarantee any incoming subletters performance and adherence to the lease terms.
If you have any questions regarding your commercial lease, then our lease advisory team have the expertise you need to be able to deal with matters quickly and efficiently. Call our team on 0161 817 3399 for a confidential discussion of your particular circumstances.