In the current economy there are opportunities to sublease office space at favorable rates and terms.
When it comes to commercial leasing, the challenge for potential subtenants is to avoid the dangers of subleasing from a distressed tenant by asking specific questions, and also strengthening the language in subleases and related documentation to protect the subtenant’s interests.
Imagine a scenario in which there is a primary lease of office space between a landlord and a tenant. The tenant has been affected by the economic downturn and has undergone lay-offs, leaving approximately half of its office space vacant. The tenant decides to sublease the vacant office space. Before signing a sublease with the tenant, the potential subtenant should consider the following.
Right to Cure
Representations and Warranties
The subtenant should evaluate whether any outstanding liens, such as mechanics liens, mortgages, purchase-money security interests and landlord’s liens established in the primary lease, may be detrimental to the subleased property.
While commercial leasing and subleasing in today’s market presents numerous challenges, careful preparation and documentation will help subtenants avoid many of the risks.