Prepared
by:
Jeffrey S. Weil,
MCR.h, CCIM, SIOR
Senior Vice President
Colliers International
1850 Mt. Diablo Blvd.,
Suite 200
Walnut Creek, CA 94596
Ph. 925.279.5590 Fax 925.279.0450
jweil@colliersparrish.com
www.officetimes.com
Since 2001, a number of office tenants downsized
and sublet excess facilities, thus becoming a sublandlord/sublessor. Many
of these firms may have had some previous experience with the duties,
obligations and business nuances that accompany this role, while for others this
has been a first-time experience. However,
it has been my experience that even the veteran sublandlord sometimes has staff
unfamiliar with these new responsibilities, or in concentrating on their normal
course of business occasionally allow a sublandlord task slip through the
cracks, to their unknowingly economic disadvantage.
Collecting Rent
Make sure you collect the appropriate rent
from your subtenant on the day it is due. Act
as if you are a professional Landlord and have set policies in place should
3-day notices or other legal action be required.
Enlist the real estate broker’s assistance if they helped you procure a
subtenant who is delinquent in paying their rent. Consider hiring a real estate specialist attorney versus your
in-house counsel, who may be too busy with normal corporate duties, or less
familiar with this section of the law.
Other Payments
Make sure you are collecting all monies due pursuant to your sublease agreement,
including parking charges, after-hours HVAC, special janitorial charges and
other miscellaneous costs, all of which should be clearly stated in your invoice
from your Landlord and which usually can then be charged to your subtenant.
Operating Expenses
Most office subleases allow the sublandlord to be reimbursed by the subtenant
for the prorated share of operating expense increases over a set base year, and
I have seen a number of instances where this reimbursement right is forgotten
resulting in lost monies rightfully due. This
is also important after the subtenant term expires, as often your bill does not
get sent to you until early the following year, at which time you usually will
still have the right to collect from your subtenant.
Tenant Improvements
Most subleases require the approval of both the Landlord as well as the
sublandlord for tenant improvement work done during the sublease term.
Make sure this is followed, perhaps by occasionally checking with your
subtenant and reminding them (as well as a written note) as unauthorized work
done by the subtenant might be a cost to you to remove, should the Landlord
require this. Yes, you probably have recourse to your subtenant but this could
get more complicated.
Holdover
Make sure your subtenant vacates or does a direct lease on a timely manner or
you may be exposed to holdover charges pursuant to your master lease.
Security Deposit
If you have a security deposit with the Landlord, make sure it is returned
at the end of your term, and if you are holding one for your subtenant, make
sure your physical inspection after the subtenant vacates does not necessitate a
deposit forfeiture to repair or restore the premises.
I am not an attorney so these thoughts should in no way be construed as legal
advice, and I always recommend you obtain professional counsel should this be
required. Also, as I tell all my
sublandlords/sublessor, please don’t hesitate to call your original broker
should you need their assistance during the term and please feel free to contact
me, Jeffrey Weil, at 925.279.5590.