How sub-leasing office space can unlock benefits for your business

How sub-leasing office space can unlock benefits for your business

Office – Workplace June 2017

Space Race

So, you’ve got your office up and running and ticking along but now you find that you have committed to more space than you actually need.

Maybe your business structure has changed and some of your staff now work from home. Perhaps you’ve consolidated your service offering and made efficiencies which means you don’t need to have as many staff. Or possibly, the business expansion you’d banked on hasn’t come to pass. Whatever the reason, you do have options. You could:

Sub-lease some of the space – another business shares your business premises

Assign the existing lease – you leave and another business takes over your existing lease on the same terms (note: you could still be liable for the new tenant’s obligations if that tenant defaults)

Surrender your lease – you vacate and the landlord negotiates with a new tenant

At all times you’ll need to bear in mind your responsibilities and commitments under your existing lease. You will have contractual obligations to fulfil and tenant/landlord ducks to get in a row.

A signed lease generally requires a landlord’s express permission/consent to change the terms of that lease. However, while a landlord cannot ‘unreasonably’ withhold or delay consent to sub-lease or assign a lease, you are changing the original agreed terms of the lease and the landlord may not see things the same way as you do.

Let’s focus on sub-leasing here. Like most things in business – and life – there are pros and cons associated with change.

Sub-leasing Pros:

• You get a contribution to your rental outgoings and you may be able to negotiate proportionally-shared operating costs
• You don’t have to relocate your business to smaller premises and so can avoid the headaches that moving can bring
• Think of the networking benefits in having another business within your everyday space
• There could be some cross-over of required administrative services and you may be able to share those costs
• It’s a better use of space and that could sit well with your “tread lightly’ eco-principles
• You’re in control of the sub-lease timeframe and you can factor in flexibility should you need to crank your operation in the future
• Creates a bit of a buzz around the water cooler – new faces, new thinking.

Sub-leasing Cons:

• You still have all the responsibilities under your existing lease – the buck stops with you
• You may find that there’s extra wear and tear on the premises that you’ll have to make good when your lease ends
• You could be undermining the landlord’s attempts to lease other space in the building – not great for landlord/tenant relationships!
• Remember to factor in unforeseen costs associated with sub-leasing such as legal fees, commissions to leasing agents.

As always, seek professional or legal advice before making any bold changes to your lease arrangements – and keep your landlord in the loop.

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