What happens if you have outgrown your commercial space, want to move and still have a number of years left on your current lease arrangement?
If your company has outgrown the current space due to business growth it could be worth considering an ‘assignment’ or ‘sublease’ of the property your company has leased. This has become more common as businesses consolidate or have simply outgrown their existing space which is preventing their continued growth.
What is a Commercial Property Assignment?
In commercial property an “assignment” is the process through which a tenant transfers their interest and their obligations of that lease to another tenant. Consent to assign a lease to another party must be with the landlord’s consent which in most instances cannot be unreasonably withheld or delayed.
It’s worth noting that if a tenant assigns (transfers) the lease to another person, Stamp Duty must be paid on the assignment.
How does a Commercial Sublease Agreement work?
A commercial sublease is an agreement between the tenant currently leasing a property, and a new tenant looking for space.
When you sublease your space, you effectively become the landlord to the subtenant. The subtenant occupies your space (or a portion of your space) for a specific time period within that remaining lease term.
You are still responsible for all the obligations under the lease to the landlord which you must continue to observe under the terms of the lease. It is your responsibility to collect rent from your subtenant each month or quarter and deal with any issues arising from the sublease arrangement.
You must also seek the landlord’s consent to sublease the property prior to doing same. Some leases have provisions not to allow subletting so it’s best to familiarise yourself with your commercial lease and understand your options on subleasing.
How do you find assignees or subtenants?
When you’re ready to assign or sublet your space, you should engage with a firm of Chartered Surveyors who are familiar with commercial leases and with the process of assignments and subletting.
O’Neill & Co. can help you determine the best rate for your space, make sure it is positioned competitively, and bring years of marketing experience to the table. We can assist in navigating the complex negotiation process with both your landlord and with the potential assignees or subtenants.