The Law of Commercial Subleases

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Commercial subleases are entered into by the original tenant and a business that is going to occupy the property for the remaining portion of the lease period.  In this agreement, the original business renter is called the “sublessor” while the subsequent tenant is called the “sublessee.”  The landlord – the person who owns the property – is called the “lessor” and the sublessor the “lessee.”

The Right to Sublease

The right of a commercial lessee to sublease is not guaranteed.  However, the law favors “assignment.”  Therefore, if the lease is silent on the issue, the right to sublease is generally assumed.  A majority of commercial leases grant the lessee the right to sublease with the landlord’s written approval.  Subleases usually contain this same provision, allowing the sublessee to sublease. 

Raising the Rent

The original lease may prohibit sublessors from raising the rent in order to make a profit.  Thus, a sublessor may not raise the rent above what she pays to the landlord, or would pay for that subdivision.  However, if not expressly provided for in the lease or sublease, there are no limits on the amount of rent increases.  In commercial leases, the limit is set by the laws of supply and demand.

Damage During the Sublease Period

Commercial sublessees are usually responsible for any damage that may occur to the property while in possession.  And lessees, in turn, are usually responsible for any damage to the landlord.  Also, unlike residential lessees, commercial sublessees usually have a duty to maintain the property in a good and safe condition, including electrical wiring, plumbing, heating, and all other equipment or system installation.

Conclusion

Sublessees are responsible for the terms and conditions spelled out in the sublease.  Thus, sublessees may be excused if the sublease contains unfair, unreasonable, or shocking terms, or if the sublessee signed the contract under duress or undue influence.  However, as the lessee is constrained by the terms of the lease, the sublessee must abide by the terms of the sublease. 

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Last Modified: 10-26-2012 03:13 PM PDT

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