#6: THE SPECIAL ISSUES OF SUB-LEASING OFFICE SPACE 

"Before you get into anything know how you can get out." - Anonymous

It's easy to get into a lease, hard to get out.

In the excitement of selecting a new office location, and all of the details it involves, many executives overlook one of the most important. That is, how to get out of the space, if necessary.

If they've had no experience with sub-leasing, many tenants assume that it is a simple matter. They assume that the building or they, themselves, simply find someone else who wants the space, and they make a deal. 

Simple, right? Not so fast.

Nobody, with the possible exception of a sub-lessee, likes the idea of sub-leasing. Not the landlord. Not the original lessee. It is upsetting, and often causes turmoil. Yet, in today's roller coaster of mergers, acquisitions, and down-sizing, how sub-leasing is addressed in an office lease may be as important as the space and rent.

Tenants should assume nothing

As in all other leasing elements, a tenant should assume nothing. Sub-leasing must be considered very carefully. The primary issue, of course, is whether sub-leasing is possible for the tenant under any conditions. Many leases simply forbid sub-leasing altogether. Those that do allow it are full of landlord-favorable, so-called "standard terms" that make it easy on the landlord, hard and costly for the tenant.

There is no such thing as "standard terms" for sub-leasing. Sub-leasing terms will be exactly what you and your broker are able to negotiate during the drafting of the original lease.

There will be important issues of timing, such as possible minimum portion of lease fulfillment before sub-leasing is allowed. The issue of the amount of notice (time) you must give the landlord.

Money issues are paramount

There will be obvious issues of money, such as who pays the difference if the sub-lease is for less, or who gets the difference if the sub-lease is for more. Who pays for any reconfiguration necessary to the space? There is the issue of whether a tenant can sub-lease a portion of the space, and keep the balance.

No tenant should expect a landlord to suffer due to changes in a tenant's needs. Likewise, no tenant should be held in bondage for the full lease terms with no relief if she can not fulfill the original lease.

As in so many other areas of leasing, sub-leasing problems for the tenant are caused by what a lease fails to specify. Specificity in sub-leasing language and terms is enormously important, because when a need to sub-lease arises the tenant is under great pressure. Greater pressure than when he originally moved in.

Specific sub-leasing language and terms allow a tenant to plan even before notifying the landlord. Any extra costs and requirements can be factored in the sub-leasing decision on the front end, not in the middle of re-negotiations. Specificity eliminates surprises, miscalculations, and the need to rethink an important decision all over again.

It's a whole new ball game

Trying to negotiate sub-leasing rights on a two or three-year-old lease is a whole new ball game from the original lease negotiations. The timing is different, the real estate market may be different, the issues certainly are different.

The landlord budgets in your rent an amount for brokerage commissions. Since you're paying for it, you should see to it that at least some of the money works for you, rather than going 100% to the landlord's broker whose interests are the landlord's, not yours.

MalmoMemphis Real Estate represents office tenants. Our experience and knowledge, and our freedom from conflicts of any kind put you in the driver's seat in any lease negotiations.

The 'Tenant's 10-Point Guide to Leasing Commercial Space' is copyrighted by MalmoMemphis Real Estate, Inc., (MMRE) and may not be reproduced without the expressed written consent of MMRE, and the inclusion of notice that the material is 'Copyrighted by MalmoMemphis Real Estate, Inc.'