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Commercial Sublease Agreement

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COMMERCIAL SUBLEASE AGREEMENT

THIS SUBLEASE dated this 10th day of August, 2020

BETWEEN:

____________________
(the "Sublandlord")

OF THE FIRST PART

- AND -

____________________
(the "Subtenant")

OF THE SECOND PART

Background

  1. This is an agreement (the "Sublease") to sublet real property according to the terms specified below.
  2. The master lease (the "Master Lease") is dated August 10, 2020 and is between ____________________ (the "Landlord") and the Sublandlord with respect to the following lands and any improvements on those lands (the "Premises"): __________________________________________________________________________
    __________________________________________________________________________
    __________________________________________________________________________
    __________________________________________________________________________
  3. The Subtenant is willing to undertake certain obligations of the Master Lease.

IN CONSIDERATION OF the Sublandlord subletting and the Subtenant renting the Subleased Premises, both parties agree to keep, perform and fulfill the promises, conditions and agreements below:

  1. Subleased Premises
  2. The Sublandlord leases to the Subtenant all of the Premises (the "Subleased Premises").
  3. Term
  4. The term (the "Term") of this Sublease commences at 12:00 noon on August 10, 2020 and ends at 12:00 noon on August 10, 2020.
  5. The provisions of this Sublease are subject to the terms and restrictions of the Master Lease.
  6. Rent
  7. Subject to the provisions of this Sublease, the rent for the Subleased Premises is $__________ (the "Rent") per month.
  8. The Subtenant will pay the Rent to the Sublandlord at ____________________________________________________________, or at such other place as the Sublandlord may later designate, on or before the __________ of each and every month.
  9. Use of Subleased Premises
  10. Except as otherwise provided in this Sublease, the Subtenant and the agents and employees of the Subtenant will only use the Subleased Premises for a purpose consistent with the permitted use allowed in the Master Lease. Further, the Subtenant agrees to comply with all other applicable provisions of the Master Lease, and will not do anything that would constitute a violation of any part or condition of the Master Lease.
  11. Utilities
  12. All payments for utilities and other charges connected with the Subleased Premises, which are to be paid by the Sublandlord under the Master Lease, will be paid by the Subtenant during the Term of this Sublease.
  13. Maintenance and Repairs
  14. The Subtenant agrees to surrender and deliver to the Sublandlord the Subleased Premises and all furniture and decorations within the Subleased Premises in as good a condition as they were at the beginning of the Term, reasonable wear and tear excepted.  The Subtenant will be liable to the Sublandlord and the Landlord for any damages occurring to the Subleased Premises or the contents of the Subleased Premises or to the building which are done by the Subtenant or the Subtenant's guests.
  15. The Subtenant will immediately report all general maintenance issues and needed repairs to the Sublandlord and the Landlord.
  16. Insurance
  17. The Subtenant, at the expense of the Subtenant, will carry insurance similar to that required of the Sublandlord under the Master Lease. The Subtenant will include the Sublandlord and the Landlord as additional insured parties on all policies of insurance.
  18. The Subtenant will provide proof of such insurance to the Sublandlord and the Landlord upon the issuance or renewal of such insurance.
  19. Alterations and Improvements
  20. The Subtenant will have the same right to make such alterations and improvements to the Subleased Premises as the Sublandlord is allowed in the Master Lease.
  21. Any alterations and improvements must comply with all applicable construction laws and regulations regarding property improvements.
  22. The Subtenant will ensure that the Subleased Premises remain free and clear of any and all liens arising out of the work performed or materials used in making such improvements to the Subleased Premises.
  23. Taxes
  24. The Subtenant will pay any privilege, excise and other taxes duly assessed against the business of the Subtenant, the Subleased Premises and any personal property on or about the Subleased Premises. The Subtenant will avoid the assessment of any late fees or penalties.
  25. Event of Default
  26. The Subtenant will default under this Sublease if any one or more of the following events (the "Event of Default") occurs:
    1. The Subtenant fails to pay the Rent to the Sublandlord or any amount of it when due or within any grace period, if any.
    2. The Subtenant fails to perform any of its obligations under this Sublease or any applicable obligation under the Master Lease.
    3. The Subtenant becomes insolvent, commits an act of bankruptcy, becomes bankrupt, takes the benefit of any legislation that may be in force for bankrupt or insolvent debtors, becomes involved in a voluntary or involuntary winding up, dissolution or liquidation proceeding, or if a receiver will be appointed for the affairs of the Subtenant.
    4. The Subtenant abandons the Subleased Premises or any part of the Subleased Premises.
    5. The Subtenant uses the Subleased Premises for any unpermitted or illegal purposes.
    6. The Subtenant fails to commence, diligently pursue, and complete the Subtenant's work to be performed pursuant to this Sublease pertaining to the Subleased Premises.
    7. The Subleased Premises, or any part of the Subleased Premises is completely or partially damaged by fire or other casualty that is due to the Subtenant's negligence, wilful act, or that of the Subtenant's employee, family, agent, or guest.
    8. Any other event of default provided in the Master Lease or the Act.
  27. Remedies
  28. Upon the occurrence of any Event of Default, the Sublandlord has any or all of the following remedies:
    1. Terminate the Sublease upon the greater of any notice required in the Master Lease or the Act and the Term will then immediately become forfeited and void.
    2. The Sublandlord may, but is not obligated to, perform on behalf of the Subtenant, any obligation of this Sublease or the Master Lease which the Subtenant has failed to perform. The Sublandlord may seek redress from the Subtenant for such performance.
    3. The Sublandlord may reenter the Subleased Premises or any part of the Subleased Premises and in the name of the whole repossess and enjoy the same as of its former state anything contained within the Subleased Premises.
    4. Any other remedy provided in the Master Lease or the Act.
  29. No reference to or exercise of any specific right or remedy by the Sublandlord will prejudice or preclude the Sublandlord from any other remedy whether allowed at law or in equity or expressly provided for in this Sublease or the Master Lease. No such remedy will be exclusive or dependent upon any other such remedy, but the Sublandlord may from time to time exercise any one or more of such remedies independently or in combination.
  30. Upon the expiration, termination or cancellation of the Master Lease or this Sublease, all obligations of the parties under this Sublease will be extinguished.
  31. Any improvements remaining on the Subleased Premises upon termination will revert to the Sublandlord and will be free of any encumbrance at the time of such reversion.
  32. Surrender of Premises
  33. At the expiration of the Term of this Sublease, the Subtenant will quit and surrender the Premises in as good a state and condition as they were at the commencement of this Lease, reasonable use and wear and damages by the elements excepted.
  34. Governing Law
  35. It is the intention of the parties to this Sublease that the tenancy created by this Sublease and the performance under this Sublease, and all suits and special proceedings under this Sublease, be construed in accordance with and governed, to the exclusion of the law of any other forum, by the laws of Alberta, without regard to the jurisdiction in which any action or special proceeding may be instituted.
  36. Severability
  37. If there is a conflict between any provision of this Sublease and the applicable legislation of Alberta (the "Act"), the Act will prevail and such provisions of the Sublease will be amended or deleted as necessary in order to comply with the Act. Further, any provisions that are required by the Act are incorporated into this Sublease.
  38. In the event that any of the provisions of this Sublease will be held to be invalid or unenforceable in whole or in part, those provisions to the extent enforceable and all other provisions will nevertheless continue to be valid and enforceable as though the invalid or unenforceable parts had not been included in this Sublease and the remaining provisions had been executed by both parties subsequent to the expungement of the invalid provision.
  39. Assignment and Subletting
  40. The Subtenant will not assign, transfer or further sublet the Subleased Premises or any part of the Subleased Premises without the prior written consent of the Sublandlord and the Landlord.
  41. Notices
  42. Unless otherwise specifically provided in this Sublease, all notices from the Subtenant to the Sublandlord will be served or sent to the Sublandlord at the following address:
    ____________________________________________________________
  43. Unless otherwise specifically provided in this Sublease, all notices from the Sublandlord to the Subtenant will be served or sent to the Subtenant at the following address:
    ____________________________________________________________
  44. All notices to be given under this Sublease will be in writing and will be served personally or sent by certified or registered mail using the Canada Post corporation.
  45. Master Lease
  46. Except as otherwise expressly provided in this Sublease, the Subtenant will perform all applicable duties and obligations of the Sublandlord under the Master Lease from August 10, 2020 until the end of the Term of this Sublease.
  47. Except as otherwise expressly provided in this Sublease, the Sublandlord will have, as to the Subtenant, all applicable rights and remedies that the Landlord has with respect to the Sublandlord in the Master Lease.
  48. This Sublease contains all of the conditions and terms made between the parties to this Sublease, and may not be modified orally or in any other manner other than by agreement in writing signed by all parties to this Sublease or their respective successors in interest.
  49. This Sublease incorporates and is subject to the Master Lease, a copy of which has been or will be later provided to the Subtenant, and which is incorporated as if it were set out in this Sublease.
  50. General Provisions
  51. In the event of any legal action concerning this Sublease, the losing party will pay to the prevailing party reasonable attorney's fees and court costs to be fixed by the court and such judgment will be entered.
  52. The Sublandlord may enter the Subleased Premises upon 24 hours notice for any of the following reasons:
    1. to inspect the Subleased Premises;
    2. to maintain the Subleased Premises; or
    3. to make repairs that the Sublandlord is obligated to perform.
  53. This Sublease will extend to and be binding upon and inure to the benefit of the respective heirs, executors, administrators, successors and assigns, as the case may be, of each party to this Sublease. All covenants are to be construed as conditions of this Sublease.
  54. All sums payable by the Subtenant to the Sublandlord under any provision of this Sublease will be deemed to be Additional Rent and will be recovered by the Sublandlord as rental arrears.
  55. Where there is more than one Subtenant executing this Sublease, all Subtenants are jointly and severally liable for each other's acts, omissions and liabilities under this Sublease.
  56. The Subtenant will be charged an additional amount of $25.00 for each N.S.F. cheque or cheque returned by the Subtenant's financial institution.
  57. All schedules to this Sublease are incorporated into and form an integral part of this Sublease.
  58. Headings are inserted for the convenience of the parties only and are not to be considered when interpreting this Sublease. Words in the singular mean and include the plural and vice versa. Words in the masculine include the feminine and vice versa. The words "Sublandlord" and "Subtenant" as used in this Sublease include the plural as well as the singular; no regard for gender is intended by the language in this Sublease.
  59. This Sublease may be executed in counterparts.
  60. Time is of the essence in this Sublease.
  61. The Sublandlord and the Subtenant have no interest or other rights of ownership in each other. The parties to this Sublease are not agents for each other. Under no circumstances will this Sublease be construed as creating a partnership or joint venture between the parties to this Sublease.
  62. Each signatory to this Sublease acknowledges receipt of an executed copy of this Sublease.
  63. This Sublease will not be valid and binding on the Sublandlord and Subtenant unless and until it has been completely executed by and delivered to both parties and the Landlord has consented to this Sublease.

IN WITNESS WHEREOF  the Sublandlord and the Subtenant have duly affixed their signatures under hand and seal on this 10th day of August, 2020.



_____________________________
Witness



_____________________________
____________________



_____________________________
Witness



_____________________________
____________________

Commercial Sublease Agreement Information

What is a Commercial Sublease Agreement?

With a Commercial Sublease Agreement, commercial tenants can lease a part (or all) of their rental property to a subtenant. The original tenant then becomes a sublandlord and must ensure that the subtenant fulfills their obligations.

To clarify subtenant obligations, a commercial sublease outlines the length of the subtenancy, payment terms, and permitted uses of the property. It also contains contact details for the sublandlord, subtenant, and original landlord.

Who are the parties in a Commercial Sublease Agreement?

Sublandlord: Also known as the original tenant or the sublessor, the sublandlord is the party responsible for subleasing the space and reporting to the landlord.

Subtenant: Also known as the sublessee, the subtenant is the party that rents commercial space from the sublandlord.

Although the original landlord is not party to a Commercial Sublease Agreement, the contract should include the landlord’s contact details and written permission to sublease.

When should I sublease a commercial space?

Subleasing is an effective way for a commercial tenant to recoup costs and share certain lease obligations without breaking their contract with a landlord.

For instance, subleasing may be a good option when a business tenant has extra office space available or needs to move out before their lease is over. In either case, a subtenant can help the original tenant make rent payments, maintain the property, and fulfill their duties to the landlord.

Additionally, sublease agreements can benefit small businesses when they are just starting out. A commercial sublet can provide a startup with the right amount of space for an affordable price.

How does subleasing work?

Before entering into a Commercial Sublease Agreement, commercial tenants must obtain their landlord’s consent. If the original lease (known as the master lease) doesn’t mention or bans subletting, the tenant should ask for permission with a written Landlord’s Consent to Sublease.

Next, screen and select a subtenant. Some landlords may prefer to be a part of the selection process, or they may trust the sublandlord to find an appropriate renter. In any case, be thorough when screening potential subtenants. This is important because the sublandlord remains responsible if a subtenant defaults on rent or breaks lease terms.

Once you’ve found a suitable subtenant, document the terms and conditions of the lease. Business tenants often need flexible terms for day-to-day operations and may ask to expand or change a space. Use LawDepot’s Commercial Sublease Agreement template to protect each party’s interests in the property and clarify your mutual understanding.

Note that a sublease agreement cannot include terms that breach the master lease agreement. If the terms of the original agreement are not met, the sublease contract may be terminated.

What does a Commercial Sublease Agreement include?

You can customise LawDepot’s Commercial Sublease Agreement to include information about:

  • The sublandlord and subtenant (i.e., the sublessor and sublessee, respectively)
  • The lease type (fixed term or automatic renewal) and length
  • A required check-in inspection
  • Costs such as rent, damage deposits, utilities, and insurance
  • The specific areas available to the subtenant
  • Any rights to modify the property

Requiring a check-in inspection is optional, but documenting the condition of a property before a subtenant occupies the space helps prove responsibility for any damage that they cause during a tenancy. Likewise, terms about deposits and insurance are optional but provide further protections for both parties in the agreement.

A sublandlord must abide by the terms of the master lease when restricting or allowing certain property rights. For example, a sublandlord may allow minor changes like painting an office or rewiring outlets, but must prohibit large structural changes like demolishing or building walls.

How much should I charge for subletting?

Generally, a sublandlord cannot charge a subtenant more rent than what they pay to the landlord. If a sublandlord is renting out their entire rental space, they often charge 80 to 100% of their rent to help recoup as much money as possible. If a sublandlord is subletting a portion of the property, determining a fair rent price depends on the amount of space they are supplying.

If you’re unsure how much rent to charge, research the costs for similar properties in your area. Also, consider any perks your space offers to a subtenant (such as location, amenities, or furniture) and whether this should be reflected in your rental price.

What terms are negotiable in a Commercial Sublease Agreement?

Business tenants have needs that vary depending on the size of their company and line of work, so it’s common to negotiate basic terms to accommodate these needs. However, it’s important to remember that a sublease is always secondary to the master lease.

For instance, a commercial subtenant may request to alter the property to suit their daily operations, but a sublandlord can restrict any changes that go against the master lease.

Although, if the landlord agrees, it may be possible to allow specific alterations. If needed, a landlord can change the terms in the master lease with a Lease Amendment.

A subtenant may also negotiate with the landlord for the right to continue leasing the property if the sublandlord defaults. Otherwise, a subtenant may face eviction if their sublandlord fails to pay rent, goes bankrupt, or breaks the master lease.

Whether you are a sublandlord or subtenant, it helps to consult a commercial lawyer when negotiating terms of a sublease.

Is a Sublease Agreement legally binding?

Yes, when executed properly, a Commercial Sublease Agreement is a legally binding contract between a sublandlord and subtenant. If one party fails to uphold their end of the contract, the other party may seek to enforce certain terms through the courts. In this case, contract and commercial tenancy laws in your jurisdiction will apply.

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