VanAntwerp Attorneys, LLP
Phone: 606-618-0698

Your business is moving. Should you sublet your premises?

If your company is considering relocating, you should do so based on business needs. Still, it's important to understand all the variables. For example, if you lease your current premises and your lease isn't up, you don't want to keep paying on your old lease as you take on a new one.

You have a few options, depending on your circumstances. One is to negotiate an early lease termination with your landlord. Another is to negotiate an assignment of the lease to another tenant. Perhaps the most common option is to sublet all or part of the property to a new party, assuming that is allowed under the terms of your lease.

The difference between these scenarios is the lease. After an early termination of your lease, the landlord relets the property under an entirely new lease. If you can assign the lease, your original lease stays in place but with a new tenant -- you are no longer a party. When you sublet, your lease stays in place with you as principal tenant and the new party as your subtenant.

If your subtenant doesn't comply with the lease, you are liable

The downside of subletting your leased property is that you could be held liable if the subtenant doesn't pay the rent or damages the property. The subtenant answers to you, bit you are ultimately responsible to ensure that the rent is paid and the terms of the lease are complied with.

Suppose your new subtenant's business fails to take off and they start missing rent payments. The landlord can sue you for the unpaid rent. Your remedy would be to sue the subtenant, who may not have much money to compensate you.

If you decide to sublet, there are a few steps you can take to reduce the risk:

Discuss the sublet with your landlord. Even if it's allowed in the terms of your lease, your landlord may reserve the right to approve specific tenants.

Check with your neighbors. This could avoid disputes over potential disruptions, competition and other issues.

Check out your potential subtenants. Understand what type of business they will be operating, how long they've been in business, their finances and credit references. Make sure you don't rent to a company that isn't appropriate under local zoning rules. Consider use issues such as whether they will use more parking or will draw more traffic to the area.

Collect the rent and keep tabs on the space. To ensure you know about any problems right away, consider collecting the rent from the subtenant and paying the landlord directly. Also, perform at least an annual inspection of the property to spot trouble.

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