What to Know about Subleasing Office Space

This article is a reprint of Wise Bread's contribution to OPEN Forum from American Express -- where small business owners can get advice from experts and share tips with each other.

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If you are looking for office space but don’t want to make a long-term, costly commitment, subleasing space may be a good solution. In most markets today, you’ll be able to obtain as little or as much space as you need now at an attractive monthly rate. Before you sign on the dotted line, be sure to understand how subleasing works.

What You’ll Pay

The tenant who is subleasing space to you theoretically is free to charge any amount of rent. However, in most markets, a subtenant (that’s you) pays less to the tenant for the space than the tenant is paying. In most parts of the country, this is now a tenant’s market. Demand for commercial space is low, so tenants can command lower rents and greater breaks from landlords. As a result, you can probably find attractive space, but shop around and negotiate hard before you make a final decision.

What You’ll Get

As a subtenant, you cannot negotiate or make any changes in the main lease between the landlord and the tenant you rent the space from. Your only concerns are the amount of rent, the size of your space, and the term of your lease.

• You may or may not be entitled to parking space. You probably can be listed in the building’s directory, but be certain of this by asking ahead of time.
• Be clear on your responsibility for repairs. You probably have to fix any minor problems in your space, such as replacing fluorescent light bulbs, but main problems, such as a leaky roof, are usually left to the landlord.
• If the space is formally separated (such as a separate office with its own entryway from the main hall), then make sure your area complies with all building codes for electrical outlets, lighting, exits, etc. This will protect your property within your space.
• If there is no formal separation (such as an area within a large office), make sure you understand whether you have access to common areas in this situation. This is often referred to as a desk-sharing arrangement. This type of sublease can afford you valuable networking opportunities with others in the office. Also determine whether your rent covers any administrative services, such as a receptionist or use of photocopying machines.
• Check whether your sublease covers such amenities as an alarm system, Internet access, or other necessary services.

The good thing about subleasing is that the space is probably in turnkey condition. The space has already been developed, so you don’t have to add wiring, lighting, carpeting, etc. If you want to make changes, such as painting the space or changing the fixtures, make sure that the sublease terms allow for alterations.

What You Should Do

Be sure to have an attorney knowledgeable in real estate law review the legal agreement you are being asked to sign. The attorney will review the master lease to make sure that the tenant has the right to sublet to you. Also make sure you have protection if the tenant is evicted, which can result in your eviction, too. A damages clause may be helpful here, as well. Find out what happens if the landlord fails to pay the mortgage on the property and is foreclosed upon.

Discuss your situation with an insurance agent so that you can be protected for both property damage and liability.

Bottom Line

Subleasing can be a great way for a home-based business to transition into commercial office space or for a start-up to begin operations. To make the most of this opportunity, learn more about subleasing (check LawDepot) and take the time to do it right.