Making the Most of an Office Sublet

2008-08-27 11:04:13

( Real Estate )



What is an Office Sublet?

An office lease is a first-hand agreement between a lessor or landlord and a lessee or tenant. The lessee agrees to pay the lessor a monthly rental fee to use the office space.

Most rented office spaces are quite expensive, especially if they are located in prime commercial areas. Furnished office spaces may also be quite expensive for the lessee, and most lease contracts cover an entire floor or large area which a lessee may not really need.

A common practice by tenants is to offer the extra space or room to a third party as an office sublet. In this case, the lessee himself also takes the role of a secondary landlord for the sublet office space, and receives rental payments for it.

Most common sublessees include doctors or other professionals who wish to have only a small private office, or start-up businesses that need space on a temporary basis until they can find another more suitable location.

Advantages and Disadvantages for the Sublessee

If you intend to operate only a small office or shop, you save on rental expenses with an office sublet. Instead of having to pay huge amounts for utilities and security, you can share the expenses with the primary lessee. You can mutually benefit by keeping an eye on each other's premises.

Advantages and Disadvantages for the Primary Lessee

If you are the primary lessee, offering the extra space in your office as a sublet helps you save on high rental expenses and maximizes the use of the entire property you are leasing from another person.

Subletting the office space especially to someone you know very well gives you extra security. The sublessee can also share in other expenses for the rented space, such as the electricity and water bills.

On the other hand, you might also compromise your own privacy, unless the office sublet is a separate room that can be accessed through another entrance. In addition, you are directly accountable to your lessor for any actions of your sublessee that might cause damage or loss to the property.

Advantages and Disadvantages for the Primary Lessor

Allowing your tenant to sublet office space to another party poses both benefits and risks. Rental proceeds from the office sublet will help your tenant defray part of his own rental and overhead expenses.

But unless you have a tenant who is responsible enough to select the right sublessee, you do face the same risks as your primary lessee in terms of property damage or loss.

An alternative is to already subdivide the property into smaller spaces that you can rent out to several tenants. This gives you more control over the property and who are using it.

If the idea of office sublets does not appeal to you, be sure to specify in your lease contract that you don't allow your tenant such an arrangement.


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