Commercial Sublease Agreement Template

Use a commercial sublease agreement to let a commercial tenant lease their space to a sublessee (with the landlord’s permission).

Updated July 22, 2024
Written by Sara Hostelley | Reviewed by Susan Chai, Esq.

A commercial sublease agreement is a legal document letting a primary business tenant lease out their rented commercial property to a third party (the subtenant) while still abiding by their original commercial lease. It outlines essential details, including the parties involved, rent payments, duration, and parties’ obligations and rights.

Supplementary Form

A primary commercial tenant can use a commercial lease application to find a suitable subtenant (sublessee) who can pay rent and meet other obligations.

• What Is a Commercial Sublease?
• Key Elements of a Commercial Sublease Agreement
• Do I Need the Landlord's Permission to Sublease?
• Reasons to Sublease a Commercial Space
• How to Sublease a Commercial Property
• Commercial Sublease Agreement Sample
• Frequently Asked Questions

What Is a Commercial Sublease?

A commercial sublease involves the original tenant leasing all or part of their leased property to a sublessee (subtenant). The original lease agreement doesn’t terminate or become void; instead, the tenant must uphold it and be answerable for any violations the sublessee causes.

Who Are the Parties to a Commercial Sublease?

• The Landlord: The landlord manages or owns the commercial property. They’re the first party to offer the property for rent and establish a master lease with the main tenant.
• The Tenant: The tenant may also be called the sublandlord. They must answer to the landlord and uphold the terms of their original lease. If allowed, they become the responsible party in a subleasing arrangement for any damages the subtenant inflicts.
• The Subtenant: The subtenant or the sublessee is the party who pays rent from the tenant. The subtenant reports to the tenant instead of having a direct relationship with the landlord.

Key Elements of a Commercial Sublease Agreement

Explore some of the key elements of a commercial sublease agreement:

• Date: The date the parties enter the agreement.
• Parties Involved: The names and addresses of the tenant and subtenant.
• Original Lease: A reference to the original commercial lease agreement and a statement clarifying that the parties will abide by its terms.
• Property Address: The address of the property being subleased.
• Description of Leased Space: A description of the lease space, especially if the tenant only subleases a portion of the commercial property.
• Sublease Term: The start and end dates of the sublease.
• Rent: The amount of rent the subtenant will pay, the payment method, and how often it’s due.
• Security Deposit: The amount a subtenant has to pay upfront.
• Late Fees and Penalties: Any late fees or penalties that will apply if the subtenant doesn’t pay on time or has a bounced payment.
• Utilities and Services: Clarification on which party is responsible for paying for utilities and services.
• Maintenance and Repairs: Clarification on which party is responsible for maintaining the property and performing repairs when necessary.
• Termination Grounds: The causes for termination.
• Use of Premises: A description of how the subtenant can use the property and clarification on if any restrictions apply.
• Subletting and Assignment: Whether a subtenant can further sublease the property or assign the rights to another party.
• Insurance Requirements: Clarification on whether the subtenant needs to obtain property damage or liability insurance.
• Governing Law: The jurisdiction whose laws will control the agreement.

Do I Need the Landlord’s Permission to Sublease?

Yes, you must obtain the landlord’s consent. Attempting to sublease if the original lease explicitly prohibits subleasing can result in legal consequences.

However, if the original lease is silent on the matter, you should still obtain explicit consent. This way, you can ensure that you respect your landlord’s right to know who’s occupying the property. Plus, you can avoid facing legal repercussions for not informing your landlord.

Reasons to Sublease a Commercial Space

Here are some reasons to sublease a commercial property:

Reasons to Sublease

• Reduce Costs: A tenant can lower some lease costs by renting out part of a leased space.
• Capitalize on Unused Space: If a tenant has extra space they’re not using, they can rent it to someone else and generate additional income.
• Obtain Flexibility: Subleasing lets a tenant who needs to relocate or downsize rent to someone else without accepting penalties for breaking the original lease.
• Meet Temporary Needs: If a tenant only needs an entire property for a specific project or short-term expansion, they can sublease a portion during slower periods.
• Create a Professional Community: Subleasing part of a space to another company can encourage network opportunities and instill a sense of community within the shared workspace.
• Navigate Market Conditions: Subleasing can help tenants minimize financial risks and manage costs during market downturns or economic uncertainties.

How to Sublease a Commercial Property

Step 1 – Review the Original Agreement

Review the original commercial lease agreement to determine if you’re allowed to sublease. Some leases have explicit provisions allowing or disallowing subleasing.

If your original lease doesn’t address subleasing or explicitly bans it, you may go to your landlord to seek permission. Prepare to explain your reasoning for subleasing, as the landlord may be more inclined to agree. Ensure you have their prior written consent before proceeding with the next steps.

Step 2 – Advertise the Property

Advertise the property for subleasing. Explain that it will be a subleasing arrangement and that the new subtenant will answer to the primary tenant rather than the landlord.

While you can advertise the property yourself, you may consider hiring an agent to do it for you. Find an agent on platforms like Realtor, Zillow, LoopNet, and Yelp.

Step 3 – Find Suitable Subtenants

Find suitable tenants who can meet their monthly rent payments and are reliable overall. Conduct screenings to ensure they have a clean background. Use screening tools like RentPrep and MyRental to get comprehensive screenings.

Step 4 – Negotiate the Sublease’s Terms

Once you choose a subtenant, meet with them to discuss the sublease’s terms. Discuss important details, such as the lease duration, rent amount, and responsibilities for maintenance and utilities.

Step 5 – Create a Sublease Agreement

Compose the contract and have both parties review and sign it. Once the sublease begins, ensure that you meet your obligations as the sublandlord. Furthermore, you can ensure that the subtenant upholds their end of the agreement to facilitate a seamless subletting relationship.

Notify Your Landlord

Issue proper notice to your landlord to let them know that the sublease has commenced.

Step 6 – Approach the End of the Sublease

Be mindful of the end of the sublease as it approaches. Determine what the next steps are and what makes sense for your situation. For example, you may want to ask the subtenant if they’re interested in renewing the lease. You may also want to terminate the lease and disallow renewal because of changes in your status as a sublandlord.

If you end the sublease, ensure the subtenant is prepared to hand over the property back to you according to the sublease’s terms.

Commercial Sublease Agreement Sample

Download a free commercial sublease agreement template in PDF or Word format below: