The use of office space is a crucial factor to the success of a business. One thing that entrepreneurs often consider to ensure that office space is efficiently utilized is subleasing. Subleasing can be financially beneficial, particularly if an area is too big for a single business to fully occupy. The rent for commercial space is determined by its size; if a large amount of it is unused, that would be inefficient utilization of the area. By renting out the remaining portion, a tenant can reduce own expenses; if the space is in high demand, it can even generate some revenue for that company.
Before subleasing a certain portion of an area, it is important to understand that an existing contract may or may not allow for subleasing. If this option is not included on the original agreement, a tenant may ask for permission to sublease space from the landlord; if permitted, the contract is amended or a clause added to accommodate the changed arrangements. If the current contract allows for such usage and is clearly stated in the agreement, the next step is to find a person or company to lease the space. Once another company is found, a contract between the tenant and subtenant can then be drafted. This should outline the duties and rights of the two parties including the terms, amount of rent, maintenance, renovations, etc. When drafting the subcontract, it is important that it not contradict the terms and conditions in the initial agreement between the building owner and the original tenant.
Following are some factors that need to be taken into consideration when finding and accepting a tenant to sublease any office area.
Size – Before listing a designated area, consider the size that is available and whether it is practical and reasonable. It is possible that the remaining space would be too cramped to conveniently house any other business and may not attract tenants at all. If it were to be rented, the cost of rent may be too little to help out with any business expenses. In this case, subleasing would not be beneficial at all.
Background Assessment – Before accepting a tenant, an investigation should be done for any potential company, including information about the type of business and the perceived image of a company. The second company should be a functioning, reputable business, as this company will affect the image of the original leasing company.
Future Growth – When drafting a contract with a subtenant, consideration must be given to the potential growth of the original business. Should the need arise for that company to expand and occupy the extra space, subleasing may not be the wisest move. A business may not need much room at the moment, but growth could require a physical expansion later. Be sure that subleasing would not stand in the way of future growth for the original company.
Subleasing is an efficient way to utilize any extra office space. Such an arrangement could reduce the original company’s rent and even generate profit out of the extra area. Before deciding to make such a decision, be sure that it is done legally by drafting a contract.