Landlord consent to sublease: what your lease probably says and how to ask

Sublease or assignment?

Your lease probably deals with both under one clause, often headed “assignment and subletting” or “transfers.” An assignment hands your whole remaining lease to someone else. A sublease keeps your lease in place and grants a subtenant part of the space or part of the term. Many leases also treat a change in control of a corporate tenant as an assignment.

Know which you're asking for, because the landlord's rights can differ between the two. For the practical side of finding and housing a subtenant, see subleasing your surplus space.

The clause types you'll see

Most clauses add conditions too: you can't be in default, the subtenant's use must fit the permitted-use clause, and the landlord's costs must be paid. Read the whole clause, including every definition it refers to.

What “not unreasonably withheld” means

It doesn't mean the landlord must say yes. In general terms, a refusal based on a legitimate concern about the proposed subtenant's financial standing, its intended use, or its effect on the building and other tenants is more likely to be seen as reasonable than one used to gain an unrelated advantage, such as reopening your rent. Whether a particular refusal is reasonable depends on the lease wording and the facts.

If you believe consent is being withheld unreasonably, get legal advice before you act. Letting a subtenant in without consent can put you in default of your lease.

Recapture and profit-sharing

• Recapture. The landlord may answer your request by ending your lease for the space you proposed to sublet, or for all of it, and taking it back. That can suit you if you simply want out; it doesn't if you planned to profit from the space or wanted it back later. Some leases let you withdraw the request to avoid recapture; check whether yours does.
• Profit-sharing. If the subtenant pays more than you pay for the same space, the lease may require you to hand over part or all of the excess, sometimes after deducting your costs of subletting, such as brokerage fees, improvements and inducements. Keep records of those costs.

What the landlord will want to see

Send a complete package. A thin request invites questions, and questions invite delay. Include:

• The subtenant's legal name, a description of its business and its intended use.
• Financial statements, and references or credit information.
• The proposed sublease or signed term sheet: premises, term, rent and any inducements.
• A plan of the sublet area, and drawings of any proposed alterations.
• Evidence of the subtenant's insurance, or a commitment to carry it.
• Details of any dangerous goods, high storage or heavy equipment.

The consent agreement

Consent usually comes as a written agreement signed by the landlord, you and the subtenant. It typically confirms that the landlord consents to this sublease only, on these terms; that the head lease prevails if the two conflict; that you remain liable under your lease, because consent isn't a release; that the subtenant will comply with the head-lease terms for its space; and that any further subletting or assignment needs fresh consent. Some agreements also let the landlord collect rent directly from the subtenant if you default.

Have your lawyer review it. A consent agreement can add obligations that aren't in your lease.

Timeline and costs

Leases often give the landlord a set period to respond once it has a complete request, and the clock may not start until it does. Allow time for follow-up questions, any approval the landlord needs from its lender or head office, and drafting the consent agreement. Plan for weeks, not days, and don't promise a subtenant a move-in date you can't control.

Many leases require you to pay the landlord's reasonable legal and administrative costs of reviewing the request, sometimes as a set administration fee, and often whether or not consent is granted. Ask for an estimate up front, and budget for your own lawyer. Plan the space side with the rent-out planner, and see the broader options at Rent out.

Your consent request, step by step

• Find the assignment and subletting clause, and every definition it uses.
• Identify the consent test: prohibited, sole discretion, or not unreasonably withheld.
• Check for recapture, and whether you can withdraw a request.
• Check for profit-sharing, and which costs you may deduct.
• Confirm you're not in default.
• Sign the subtenant conditional on landlord consent.
• Assemble a complete package: financials, use, plan and draft sublease.
• Deliver it in the form and to the address the notice clause requires.
• Diarize the landlord's response period.
• Review the consent agreement with your lawyer before signing.