WHAT IS A SUBLEASE?

Experienced commercial leasing lawyer for real property leases and subleases (in Alberta and Ontario, Canada).

Contact Neufeld Legal PC at 403-400-4092 or Chris@NeufeldLegal.com

A sublease is a legal agreement whereby an existing tenant / lessee (the "sublessor") rents out a portion of their leased premises to another party (the "subtenant" or "sublessee") for a portion of the original lease term. A key characteristic associated with a sublease is that the original tenant remains fully responsible to the landlord for the rent and all the terms of the original lease agreement, and most often requires the written consent of the landlord to proceed with the sublease (so as not to breach the original lease agreement).

It is imperative that commercial tenants understand both the primary legal aspects associated with subleasing, together with the contractual terms (pre-requisites and restrictions) contained in their controlling lease agreement, when looking to undertake the subleasing of a portion of their leased premises, including:

• Temporary Arrangement: A sublease is always temporary. The subtenant occupies the property for a specified period, and the original tenant retains the right to return and re-occupy the unit at the end of that period. This is the main difference between a sublease and an assignment, where a tenant permanently transfers their lease to a new tenant and is no longer responsible.

• Three-Party Relationship: A sublease involves three parties:

  • The Original Landlord: The owner of the property.

  • The Original Tenant (Sublessor): The person who signed the original lease with the landlord. They are still responsible for paying rent to the landlord and for any damages caused by the subtenant.

  • The New Tenant (Subtenant/Sublessee): The person who rents from the original tenant. They pay rent to the original tenant and are bound by the terms of the sublease agreement.

• Landlord's Consent is Required: In most commercial leasing arrangements, a tenant cannot sublease their leased premises without the landlord's written permission. However, most commercial lease agreements stipulate that the landlord's consent cannot be unreasonably or arbitrarily withheld, such that the landlord may not refuse consent for an unreasonable reason.

• Original Tenant's Responsibility: This is a crucial point for anyone considering subleasing. If the subtenant fails to pay rent or causes damage to the property, the original tenant is still on the hook. The landlord will hold the original tenant responsible, and it is up to the original tenant to pursue the subtenant for any losses.

• Sublease Agreement: The original tenant and the subtenant must create a separate sublease agreement, which should have been reviewed by the landlord in advance of the sublease's commencement, such that the sublease arrangement is not in breach of the original lease agreement.

For knowledgeable and experienced legal representation in commercial leasing matters, whether that entails lease review, drafting, negotiation and enforcement, contact commercial leasing lawyer Christopher Neufeld at Chris@NeufeldLegal.com or 403-400-4092 / 905-616-8864.

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Net Lease versus Gross Lease: In the world of commercial real estate, landlords never seek to be outdone when it comes to the rent that they charge commercial tenants for renting the leased premises. Nevertheless, the manner in which landlords structure rental payments can vary substantively, based on how the landlord believes it will best incentivize a prospective tenant to commit to the proposed lease arrangement. Read More.

 

What is a Sublease? A sublease is a legal agreement whereby an existing tenant / lessee (the "sublessor") rents out a portion of their leased premises to another party (the "subtenant" or "sublessee") for a portion of the original lease term. A key characteristic associated with a sublease is that the original tenant remains fully responsible to the landlord for the rent and all the terms of the original lease agreement, and most often requires the written consent of the landlord to proceed with the sublease (so as not to breach the original lease agreement). Read More.

 

Why is a Sublease Agreement Important? A sublease agreement is a crucial legal document for facilitating a commercial subleasing arrangement, as it not only protects the rights and establishes the responsibilities of all parties involved in subletting, being the original tenant (sublessor), the new tenant (sublessee), and the landlord, but it also tends to be essential to undertaking a well-conceived commercial sublease. Read More.

 

Obtaining Landlord Approval for Sublease: The landlord's prior written consent to a commercial subleasing arrangement is almost always a pre-requisite to the existing tenant / lessee (the "sublessor") renting out a portion of their leased premises to another party (the "subtenant" or "sublessee") for a portion of the original lease term, as the failure to obtain the landlord approval cannot result in the existing tenant breaching the original lease agreement. Read More.

 

Subleasing versus Assignment: Although both a sublease and an assignment involve a commercial tenant transferring an interest the real property that they have leased from the landlord to a third party, there are key distinctions as to the extent of the transfer, the relationship between the parties, and the liability of the original tenant, which distinguishes these two processes of transferring an interest in a commercial lease. Read More.