Information about sublease agreements
Similar to a transfer or assignment of lease, a sublease is generally used when a tenant no longer requires the property they are leasing or when a tenant is selling their business.
However, unlike an assignment, the existing tenant is still bound by their obligations to the landlord. A sublease exists between the existing tenant and a third party, whilst the original lease between the landlord and existing tenant stays in place.
If a tenant wishes to sublease all or part of the commercial property, the consent of the landlord must be obtained. Usually, the landlord will request information about the use of the premises by the sublessee. Some commercial leases may prohibit the subletting of the premises.
As the existing tenant remains liable to the landlord, the tenant should carefully choose the party with whom they enter into the sublease. The tenant should also make sure that the terms of the sublease are the same as those of the principal lease. This is especially important for any lease provisions relating to returning the property to its original state at the end of the lease.
Due the complexities that can arise, we recommend seeking legal advice if you are considering entering into a sublease.
More information
- Commercial leases – Responsibility for repairs and maintenance
- Understanding a Commercial Lease
- Traps to avoid in Commercial Leases
Need help?
Fill in the form below and one of our team will be in touch. You can also phone 1300 149 140 during standard business hours.
Related Legal Insights
Exploring Retail Leases in New South Wales: An Overview
Retail Leases Act 1994 aims to enhance consumer protection for tenants through increased transparency and communication, simplify the retail lease process, and provide access to low-cost dispute resolution between landlords and tenants.
Read more
Self Managed Super Funds – Buying Property
Introduction Since 2007, self-managed super funds (SMSF) have been permitted to borrow money to invest in all types of real property including residential property, commercial property and industrial property. Prior to 2007, SMSFs could purchase property but were not permitted to borrow money to buy a property that the fund...
Read more
Options to renew in commercial leases – don’t get caught out!
Option clause is a term in a commercial lease An option clause is a term in a commercial lease that allows a tenant to renew their lease at the end of the original lease period, if they meet certain conditions. Landlords are not obliged to offer a renewal option. However,...
Read more
Retail Leasing Disclosure Obligations
When leasing commercial property, it is important for tenants and landlords to understand the relationship they are entering and the rights and obligations they have. In New South Wales, retail leases are regulated by the Retail Leases Act 1994 (NSW) (the ‘Act’). A commercial lease is classified as a ‘retail...
Read more
Commercial Leasing and COVID-19
Commercial Leasing and COVID-19 Mandatory Code of Conduct released The economic impact of COVID-19 on business generally, and commercial leasing arrangements has been the focus of many landlords, tenants and governments. On 7 April 2020, the Federal Government released its much-anticipated Mandatory Code of Conduct – SME Commercial Leasing Principles...
Read more
The financial risk in giving personal guarantees in leases
The financial risk in giving personal guarantees in leases If you are a director of a company entering a commercial or retail lease, a landlord will likely require you to give a personal guarantee for the company’s obligations under the lease. In such cases, directors should fully comprehend the extent...
Read more
What is an Agreement to Lease?
What is an Agreement to Lease? When renting business related property it is important for both landlords and tenants to understand the relationship they are entering into and the rights and obligations that they each have, the document that governs this relationship is usually a Commercial Lease. A Commercial Lease...
Read more
Commercial leases – Responsibility for repairs and maintenance
Commercial leases – Responsibility for repairs and maintenance A commercial lease is a legally binding contract that gives a tenant certain rights over a property for a set period of time subject to the terms and conditions set out in the lease. A commercial lease is used when leasing property...
Read more
Understanding a Commercial Lease
What is a commercial lease? When renting business related property, it is important for both landlords and tenants to understand the relationship they are entering into and the rights and obligations that they each have, the document that governs this relationship is usually a commercial lease. So, what is a...
Read more