To Lease or Sublease, That is the Question

Real Estate & Construction Advisor & Alert

PUBLISHED ON: July 1, 2002

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The current economic downturn has forced many business tenants to downsize, restructure, or relocate, and in the process they must dispose of a part, if not all, of their leased space. Sometimes a landlord will take back the leased space by exercising a right of recapture contained in the lease or by negotiating a surrender of the lease by the tenant, however in a weak market the landlord is usually not inclined to do so. A tenant may seek to assign its entire lease to someone else who is willing to take it over. As an alternative
to giving up all of its lease rights, a tenant may seek to sublet all or part of the leased premises, but for a term shorter than the balance of the lease term. This creates opportunities for other companies who are in the market for commercial space and who can choose between a direct lease from the property owner or a sublease from an existing tenant.