Commercial Sublease Agreement

What is a commercial sublease agreement?

A commercial sublease agreement is a legally binding contract that allows an existing tenant to lease all or part of their leased commercial space to another party. This document could be customized for industrial property, warehouses, parking lots, land, office sublease agreements, etc. Entering a commercial sublease agreement is an efficient business solution when a business no longer needs the full space or wishes to relocate without violating the original lease agreement.

The parties involved in a commercial property sublease agreement template are a tenant and a subtenant. Both parties could be independent contractors, organizations, or businesses.

A tenant is a person who has the right of usage and possession of a commercial property and who is willing to sublease those rights to a third party. A subtenant is a person who wants to sublease premises for doing business.  It is important to remember that performance of certain business activities requires prior business licensing. Thus, make sure your subtenant has in place all administrative documents and state authorizations.

How to draft a sample commercial sublease agreement?

There are no particular rules or structure you have to follow to make a sample commercial sublease agreement. There are only two things that really matter—clarity of wording and inclusion of essential clauses.

It is also better to use platforms like FasterDraft for customizable legal documents instead of drafting from scratch. However, if you do like challenges, below we made a list of essential elements a simple commercial sublease agreement must have.

Details of the Master Lease

The first important thing to understand is that a commercial real estate sublease agreement is not an independent legal document. It actually depends on the validity and terms of the original lease, also known as a master lease. Therefore, the text of a sublease contract must state the date of signing a master lease and a landlord’s full name and contract details.

Another important element is that a sublease agreement cannot contradict the provisions of a master lease. For example, if the initial duration of a master lease is one calendar year, it means that your sublease’s term cannot exceed one calendar year. It is possible that a sublease’s duration be shorter, but never longer than the duration of a master lease.

Finally, a copy of a signed master lease should also be attached to this commercial sublease agreement. Apart from that, the text of a sublease agreement must explicitly state that the sublease is governed by the terms and conditions of a master lease. Those terms and conditions may include limitations on types of businesses you can run in the leased premises or a landlord’s right to a frequent check of a leased property, etc. All in all, if you are a tenant under a commercial sublease agreement, you have to comply not only with the signed sublease contract but also with the provisions of a master lease.

Landlord’s Consent

In most of the cases a master lease requires a tenant to get prior written consent from a landlord before signing a sublease agreement commercial contract. If this is the case, make sure a copy of such consent is being attached to a sublease contract as well. We never recommend accepting consent in oral form. Only written confirmation should really matter once a dispute pops up between the parties.

Failure to obtain a required consent directly affects the validity of the commercial sublease agreement.

Property Description

The text of a contract shall also define a detailed description of a property being leased. Those elements include a property’s location, size, and description. For example, if you are drafting an office sublease agreement, a description of a property should also include information about parking space for workers or employees.

Rental Payment Details

Another important element a commercial real estate sublease agreement must have is how much a subtenant should pay. In fact, the text of a contract must address the amount of rental payments, their frequency, and a list of methods a subtenant can use to make such a payment.

Usually rental payments under a sublease contract are higher than under an original lease. This is so because tenants try to sublease rented premises on more favorable conditions to get some profit.

Duration of the Sublease

Every subtenant should know the start and end date of the sublease.

The prolongation of the sublease contract is possible only if a prolonged lease does not exceed the duration of a master lease.

Dispute Resolution

Inclusion of a dispute resolution clause into a commercial sublease agreement template is a smart decision for many reasons. In fact, the sublease represents a multilayered relationship between a landlord and a tenant and a tenant and a subtenant. This practically means that disputes are inevitable, especially if the duration of the sublease counts in years.

The parties are free to choose any dispute resolution method they prefer. Of course, you can go directly to the court, but most people prefer to keep the court as a last resort. The best way for sublease agreements is to include an arbitration clause. In that case a decision of an arbiter in a dispute becomes mandatory for both parties, plus legal costs are lower compared with a classic litigation procedure.

Conclusive Tips

Once a sample commercial sublease agreement is ready, both parties should sign it. The landlord does not need to sign this contract. Check the original master lease, as some of them may require a tenant to send a copy of a signed sublease contract to a landlord.

The present document should be executed in two counterparts for either party. This type of contract does not require further notarization.

How to customize a sublease agreement at FasterDraft?

To get a fully customized legal document, follow the instructions given below:

1. Click the “Create Document” button.
2. Answer the questions given in the form.
3. Select a template’s format—commercial sublease agreement PDF or Word.
4. Make a payment.
5. Download, sign, and use your document instantly.