Rights to Sublet, Share, and Assign on a Commercial Lease

To avoid disputes with your landlord regarding assignments and subletting of your lease premises, you should negotiate special clauses at the time you negotiate your commercial lease allowing you the right to assign or sublet your space.  An assignment is when you transfer your entire interest in your lease to a third party.  A sublet or sharing of space is when you transfer a portion of the premises, or you transfer the space for a shorter period of time than the entire lease.  In order to assign or sublet your space, you will probably need your landlord’s permission.  If you don’t address this issue at the item you negotiate your lease, your landlord may not agree later or may impose other restrictions.   Some leases prohibit the assignment or subleasing of space.  So be sure to read your lease carefully.  It is recommended that you have a commercial real estate attorney review the lease before you sign it to make sure you are protected.   

What to Negotiate?

Smart tenants negotiate leases in their favor when it comes to assignments and subletting.  The reason you should do this is to leave yourself these options in case you merge, reorganize or have a shared ownership change.  Here are a few points you might want to add to the assignment and sublet clauses of your commercial lease:

• The landlord’s consent cannot be unreasonably be withheld
• Your landlord agrees to release you from liability
• You are entitled to a portion of the profits from the sublet or assignment.  
• Omit any clause that says a change in the ownership of your company by more than 50% is considered to be an assignment.  Otherwise, if you take a partner in, you may trigger a breach in your contract.  The breach would entitle your landlord to terminate your lease.  Then you have to start all over finding another space and negotiating a new lease with another landlord.  Wasting money, time and the disruption of your business.  

Your landlord might want an option to take back the premises or an interest in any profits from the sublease or assignment. You obviously won't be able to negotiate everything in your favor, but try and cover as many points as you can that give you flexibility. 

Consult with an Attorney

Commercial leases are complicated, and you should consult with a commercial real estate attorney before you sign one. The attorney can review your lease and help you with the negotiations of any assignment, sublet and shared space clauses as well as any other lease provisions.  The attorney can also represent you in a landlord/tenant dispute or in a lawsuit.