The recent pandemic has caused an increase in the number of tenants who seek to sublease their office space. Not only do commercial real estate tenants trying to cut down on rents on office spaces that they are not using due to the fact that employees now work from home, but many businesses have also been non-operational. Hence, subleasing seems to be a good choice. However, many commercial tenants make mistakes when subleasing their office space. This article will guide you on what to do to avoid these common mistakes.
1. Failure to Understand Responsibilities When Subleasing My Office
When you sublease your office space, you are still bound to the terms and conditions of your original lease. This means that you are still responsible for the payment of the monthly rent and other fees included in your lease. In addition, it is your responsibility to prepare your space for your new subtenant. Failure to know this may affect your subleasing experience.
2. Failure to Calculate Subleasing Cost
Even though the goal of subleasing is to make money to offset the rent, it is important to calculate the cost of subleasing and figuring out if it is ideal for your company. Essentially, you are a sub-landlord.
Here are the common costs associated with subleasing office space:
Brokerage commission: You will be responsible for paying the broker commission if your subtenant uses a broker, and they will use a broker.
Attorney fees: You will be responsible for paying the attorney who will help you draft and finalize the sublease agreement.
Moving and relocation costs: Having a subtenant means that you have to move your properties either to a new location or to another part of the building. You will be responsible for the costs associated with the relocation.
Sublease recovery: The sublease recovery shows the percentage of the rent you will recover when you sublease your office, after factoring in broker commissions, attorney fees, and market concessions
3. Failure to Calculate Lease-up Time
As a tenant, you will still be responsible for paying your rent while you wait for the new subtenant. Hence, it is important to estimate how long it normally takes in your area to get a new subtenant, based on the knowledge of the market and space desirability.
4. Failure to Evaluate Space Maintenance
Depending on what is your lease agreement, you may be responsible for repairing broken HVAC or renovating the premises. Hence, you have to ensure that the subtenant you are bringing is on who will maintain the building and keep it in good condition.
5. Not Asking The Right Questions
The right questions will set your subleasing journey in the right direction. It will also help you avoid unnecessary conflicts with your landlord and subtenant.
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How much rent will the new subtenant pay?
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Will the new tenant agree to pay for maintenance as agreed in your original lease?
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Who pays utility expenses?
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Do the parties have obligations to secure insurance?
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What happens when the sublease terminates?
If your business has experienced any significant change since the onset of this pandemic, and your office space no longer meets your business needs, you may want to consider subleasing part or all of your space. Make sure you engage a tenant rep broker to help you throughout the entire process.
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