What is a commercial property sublease?
Commercial property leases usually have a term of several years with options to extend the term. Subleasing or subletting is an arrangement where the head tenant or head lessee may further let out the property or portion of commercial property to a third party known as the subtenant or sublessee.
Commercial subletting arrangements are very popular in large, multi-storied office buildings which are generally owned by strata companies or body corporates. Such companies are the head lessors or head landlords in the main leasing arrangement with property management companies. The property management companies then sublet suites or even whole floors to separate business owners.
The subtenant or sublessee has the same rights and responsibilities as the head lessee under the main lease. The head lessee will be responsible for the sublessee’s behaviour and for any loss or damage caused by them.
How to obtain head lessor or landlord’s consent and enter into a subletting arrangement
The head lease or main lease agreement must allow for subletting arrangements in commercial properties. If the head landlord/head lessor permits, the head lessee (or the sublessor in the sub lease arrangement) will need to arrange for a separate sublease documentation and arrangement with the subtenant or sublessee. The head lessee will effectively act as a landlord in relation to the sublessee: collecting rent and dealing with them directly, while at the same time maintaining all the responsibilities of a lessee under the head lease agreement with the head lessor.
Terms of some of the head leases will require the head lessee to provide the head lessor/landlord with specific information about the sublessee for them to consent to the sublease. The landlord’s consent needs to be in writing.
A common practice of obtaining landlord’s consent is officiated through entering a deed of consent. This states that the landlord has agreed or consented to the arrangement of a sublease. The subleasing documentation process begins afterwards.