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Too much space?  Review these legal issues when subletting your space

Written by Daniel P. Dalton on December 26, 2020 Category: Business Law & Transactions, Business Leases, Small Businesses
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Many companies, non-profits and churches are looking at the space that they own, or have leased, and reached the conclusion that they own, or have leased, too much space. Before you enter into an agreement to sublease your space, think about the following items and call your attorney to prepare a sublease to protect your rights.

  • Permission to sublet in your lease. You may recall looking at your lease when you executed years ago, but do not recall the terms and conditions therein.  Before advertising the subletting of your space, check the lease to make sure that you can sublet the space. Many property owners include lease provisions that preclude your subletting without their approval.  And further, they may demand a percentage of the lease payment to be paid to them.  Make sure that you have the ability to sublet your space, and if so, if the owner is entitled to any compensation for the same.
  • Zoning approval for the sublet. While your particular use may have been permitted when you leased your space, the zoning code of your city may have changed and your use is no longer permitted. While you have a prior nonconforming use to stay in your space, you likely are not able to expand the use by allowing a subtenant in the building. Make sure that the subtenant’s use of the space is permitted in your building.
  • Compliance with building and fire codes. Make sure that the local parking code, and building and fire codes, allow for your subtenant to use the space. Most office spaces have restricted amounts of available on-site parking for tenants to use. If your subtenant has more employees than spaces, you may have an issue. Likewise, building an fire codes speak to the occupancy of the building. If your subtenant plans on doing something that requires building code upgrades for fire safety, you will need to make sure that there is compliance from the tenant.

Once you confirm that the subtenant’s use complies with your lease, with the local zoning code and the building and fire codes, work with an attorney to make sure that you, as the landlord, include at least the following items in your sublease.

  • Names of All Tenants and Occupant. Every adult who is part of the sublease should be named as either a tenant or occupant on the lease or rental agreement. Each tenant is legally responsible for paying the full amount of rent and occupants are required to follow all of the terms of the lease or rental agreement.
  • Description of Rental Property. Clearly describe the space that is to be sublet, including, the specific rooms, spaces, storage areas or parking spots that are included. Similarly, specify areas that the tenants are not allowed to access.
  • Term of the Tenancy. Rental agreements create short-term (usually month-to-month) tenancies that renew automatically until the landlord or tenants terminate. Leases, on the other hand, create tenancies that terminate after a specific term (usually a year). Whichever you use, be specific: note the start date, the tenancy length, and (if creating a lease) the expiration date.
  • Rental Price. Don’t just write in the amount of rent—spell out when (typically, the first of the month) and how it’s to be paid
  • Security Deposits and Fees. Be very clear about the dollar amount of the security deposit, where you’ll hold the security deposit, how you might use the deposit and any nonrefundable fee.
  • Repair and Maintenance Policies. Your best defense against tenants who withhold rent is to clearly draft polices defining the obligations of yourself as landlord and duties of the tenant to repair and maintain the space. Address in advance the responsibility to clean, paint, maintain and repair to avoid disputes in the future.
  • Landlord’s Right to Enter Rental Property. If you plan on staying in your building, and leading out a portion of your space, it is critical to address you right as the landlord to enter the rented space so as to avoid tenant claims of illegal entry or violation of privacy rights.

These are but a few items to review and include in your sublease. Please contact your attorney and create the lease that works best for you prior to your entering into a lease agreement. The professionals at Dalton & Tomich PLC can help you with this issue. Contact Ms. Zana Tomich in Detroit, Michigan or Noel Sterett in Rockford or Chicago, Illinois to help you address leasing issues.

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