If you own commercial property to lease, you have to decide whether or not you will allow subleasing by a tenant. There is no right or wrong answer, but you should consider the totality of the circumstances when making your decision.
Below are some pros and cons of subleasing commercial real estate.
Why you might want to sublease
We’re living in uncertain economic times where even high-end retailers may be struggling to meet their bills and obligations. Allowing the subleasing of some square footage of the originally leased retail space to a smaller business operation selling complementary products or services could provide the necessary funds to keep your original tenant’s doors open.
Also, by allowing subleasing, property owners deal with fewer vacant properties. Letting a commercial property become vacant enhances the risk of vandalism or criminal activities taking place on the premises. That’s a security risk and a real liability. That’s in addition to the costly repairs you might need to make to get the property ready to rent once again.
The negative side of subleasing
When you sublease, you lose some control over the sublessee tenant approval process. You could wind up with a less-than-optimum tenant in your property. One way to mitigate this problem is to have a clause in your original lease that you retain veto rights of undesirable subtenants.
Also, the vetting process of sublease tenants can be far less rigorous than the process you use as the property owner. Your tenant’s future brother-in-law could be a great guy but a lousy businessman that winds up causing you headaches down the road.
When in doubt about whether or not to allow subleasing of your commercial property, it is always prudent to learn more about California commercial real estate laws and regulations.
