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Subleasing Your Space - 3 Things You Need To Know

Believe it or not, there may come a time when your current retail space no longer serves your needs. Maybe you are downsizing, and you don't need as much space as you did when you started, or maybe you are EXPANDING your business and you need a larger space.

If your lease is ending soon, it's easy enough to hop in the car and start searching for a new space, but when you have time left on your lease, the need to relocate can bring about a difficult conversation with your current landlord.

Subleasing space can be an attractive option, but there are a few things that you need to know before you start the process.

First, what is subleasing? Subleasing is renting your space to another business to offset your current liability. It's important to note that this is different than assigning a lease. With subleasing, you remain liable for the lease responsibilities, and enter into your own agreement with another business.

Before you head out to find a sub-tenant, there are a few important things you should know to make the process easier.

  1. Can You Sublease Your Space - Know what your lease says. Some leases prohibit subleasing, and some require landlord consent. Some landlords will tell you that you can't sublease, even though your lease says you can. The best thing you can do is look for sublease language in your lease agreement, and then have an open conversation with your landlord. Be sure to ask under what situation they may just let you off the hook. Sometimes if you find them a business that is equal or better quality or credit, the landlord will let you out of the lease completely.

  2. Are There Exclusives - If you are in a building with other businesses, check for exclusive uses and prohibited uses. An "Exclusive Use" is something that landlords offer to induce businesses to come in. An example would be a dance studio with an exclusive on dance and fitness. You could not bring in a sub-tenant who competes with them. Prohibited uses are something different. Prohibited uses are types of businesses that cannot be in the building due to local laws, zoning, or other reasons. For example, many municipalities prohibit the sale of alcohol and tobacco within a certain distance from a school.

  3. What's Your Number - Remember, subleasing is meant to offset your liability, not to completely eliminate it. How much money do you need to comfortably leave the space. Maybe you would take 50% of your existing monthly rent if the sub-tenant agrees to take over all of the other responsibilities like utilities, cleaning, etc. Maybe you get 100%. What if your sub-tenant will pay you more than your monthly rent? Again, check your lease. Sometimes that money has to go back to your landlord. Remember, your goal is not to make money from the sub-tenant. The goal is to move forward in your business.

Overall, subleasing is an attractive option to help you move on in your business without waiting for your lease to end. Just be sure to know what your lease says, have an open conversation with your landlord, and be reasonable. Questions on subleasing, or on leasing retail space in general? Give us a call or email me.


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