Subleasing can be a smart move if you’ve leased space that you no longer need. 

When you sublease space, you retain your lease obligations with the landlord but you become a quasi landlord yourself, and receive rent from the sublessee. Subleases will typically be at a reduced rental to what you are paying the landlord, but can be a great option if there’s only a short term remaining on the lease (6–24 months).

But in order to do it, there are a few key steps.

Check your lease

The starting point when considering your options is to review your existing lease. Most commercial leases contain clauses that relate to subleasing or assignment. 

In order to determine whether you can sublease office space, you should first review your lease and speak with a property lawyer who can advise you of what you’re entitled to do.  

Seek your landlord’s consent

The next step is to have a frank discussion with your landlord about your situation and intentions. 

Never presume that the landlord "won't mind" or "won't find out" if you sublease a property. This would be a serious mistake that could result in you being in breach of your lease and facing legal action. 

The majority of landlords aren’t able to unreasonably deny your request, but they will want to know who is occupying their property and whether or not the sublessee will pay rent.  

Engage a real estate agent 

Many New Zealand businesses are looking to offer flexible working policies at the moment. Those looking to find space to sublet have options, which means it's crucial to have a gun real estate agent on your side who can find you the ideal tenant. 

NZ Legal has a network of real estate agents we can connect you with. 

Pro tip: Be wary of the agent who guarantees the best return - they might overpromise and underdeliver.

Do due diligence

Once an agent has identified candidates willing to lease the space, it's important to do your own due diligence. Ultimately, if the sublessee doesn’t pay the rent, then you’ll have to foot the bill. 

You will also need to find out the sublessee’s intended use of the property. If it differs from how you currently use it for your business, you will need the landlord's express permission.

Get advice on building services 

Office buildings house a variety of systems that may need to be modified if you will be installing partitions to create separate space for the sublessee. 

You may need to physically divide power and lighting, or even install new metering. Air conditioning services, as well as fire services (sprinklers, exit, emergency lights etc.) may need to be reconfigured to accommodate the different spaces that will be created.

You can hire a number of consultants to help you with detailed engineering and building designs. Alternatively, contact a specialist fit out design specialist who will be able to take on the entire project on a turnkey basis. 

NZ Legal can put you in contact with trusted professionals where required. 

Get a signed sublease agreement

To protect both yourself and the sublessee, and to comply with your landlord’s requirements, you will need to enter into a formal Deed of Sublease.

A Deed of Sublease should include: 

• The area of the sublease. This needs to be well defined so it can be clearly identified. It’s always helpful to include a plan
• Distribution of rent and outgoings
• The term of the sublease. This term should expire before the term of your lease. For example, if your own lease is a four year term, the sublease should expire at three years and 364 days 
• The proportion of outgoings, according to the proportion of space being subleased
• Details of the subtenant’s use of the premises, if it differs from your own
• A copy of your lease with the landlord. The sublessee is also required to comply with its obligations
• Signatures from the landlord, the sublessee and yourself 

Having a Sublease

Once your sublease agreement is in place, you effectively become the sublessee’s landlord.

You will need to:

• Obtain your landlord’s consent for any matters that the sublessee raises, such as repairs
• Ensure the sublessee’s rights under their lease agreement are upheld
• Pay any rent or outgoings to your landlord if the sublessee fails to do so
• Repair or pay for any damage caused to the premises by the sublessee

As always, good communication is key. Keep in contact with the sublessee and provide them with a good property management service and you’re less likely to have issues.

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If you're a commercial tenant considering a sublease, NZ Legal can guide you through the process to ensure a stress free process which maximises your returns.  Get in touch with us today by filling out the form below.