Subleasing can be tricky, and it is often time-sensitive. Lessee may be paying rent on space it is not using. Potential sublessees often have an immediate need and a delay can cause them to look elsewhere. Before requesting Lessor’s consent, it is helpful to know key provisions of the AIR CRE Lease relating to subleasing. Below is a summary of key points.
No Transfer Premium: If Lessee will sublease at a rate higher than it is leasing, does it need to pay any portion of those “profits” or “premium” to Lessor? Under the AIR CRE Lease, the answer is no. While transfer premium provisions are common in commercial leases, there is no such provision in the AIR CRE Lease.
Consent Standard – Lessor Cannot Unreasonably Withhold or Delay: Paragraph 12.1(a) provides that Lessee shall not sublease “without Lessor’s prior written consent.” Notably, Paragraph 12.1(a) does not state whether Lessor’s consent is subject to a sole discretion or reasonable discretion standard. Paragraph 36 clarifies: “Except as otherwise provided herein, whenever in this Lease the consent of a Party is required to an act by or for the other Party, such consent shall not be unreasonably withheld or delayed.”
Documents Required: Lessee is required to provide the following documents in connection with its sublease request (Para. 12(e)):
- Written request to Lessor to sublease
- Description of Sublessee’s intended use
- Description of Sublessee’s required modification of the Premises
- Other information relevant to Lessor’s determination as to the financial and operational responsibility and appropriateness of Sublessee
- Other documents and information reasonably requested by Lessor
$500 Fee Required: Lessee is also required to pay Lessor a fee of $500 “as consideration for Lessor’s considering and processing said request.” (Para. 12(e).) Payment of this fee is not contingent upon Lessor granting Lessee’s request.
Expediting Sublease Consent: Sublease requests are often time sensitive. If Lessee is seeking to put pressure on Lessor to more quickly approve a sublease request, it should strictly comply with the requirements of the AIR CRE Lease, by providing all of the documentation required at the outset, as well as the $500 fee.
Legal/Other Fees: In addition to the $500 fee described above, Lessee is also required to pay Lessor’s other reasonable costs in connection with considering and responding to a request for sublease, including architect, attorney, and other consultant fees (Para. 36). These fees are required to be paid upon receipt of an invoice and supporting documentation.