How Do I Legally Sublease a Commercial Property?
Written by Law on Call Staff |Reviewed by Nathan Askins |Last Updated February 12, 2026
Subleasing commercial property allows tenants to rent out part or all of their leased space to another business, helping reduce costs. Before entering into a subleasing arrangement, it’s important to confirm the original lease permits it, consider legal implications, and make sure the new tenant won’t harm your lease.
Our guide explains what subleasing is, the benefits, steps involved, and how to make sure it’s a viable option. Let’s get to it.
Main Takeaways
- Commercial subleasing allows a tenant to rent out part or all of their space to a subtenant, but the original tenant remains legally responsible to the landlord.
- Subleasing is usually legal if the lease permits it and often requires the landlord’s written approval.
- While subleasing can reduce costs and provide flexibility, it also carries risks since the original tenant remains liable if the subtenant defaults.
What Does it Mean to Sublease Commercial Property?
Subleasing commercial property is when a tenant rents out some (or all) of their place to a to a subtenant, aka a person or business that is leasing that property from another tenant. The subtenant gets to use the space, but the landlord’s legal agreement stays with the original tenant, who is ultimately responsible for paying rent and taking care of the property.
For example, if a restaurant has extra space in their rented location, they might sublease that space to a catering company. The catering company subtenant would pay rent to the restaurant tenant, who then pays the landlord in accordance with the original lease.
Is it legal to sublease commercial property?
Yes, subleasing commercial property is generally legal as long as your lease allows it. There’s a good chance your landlord included a sublease clause in the commercial lease agreement you signed. That clause may:
- Prohibit subleasing entirely
- Allow subleasing only with landlord approval and specific conditions
It’s necessary to review your lease carefully before attempting to sublease commercial space. Failing to do so could break your lease and open you and your business up to legal ramifications.
Why Sublease?
Subleasing can benefit both landlords and tenants when done correctly.
- For landlords
Subleasing can help maintain steady rental income and reduce vacancy without terminating the original lease. - For tenants
Subleasing can lower costs, provide flexibility, and help businesses adjust to changing space needs.
It is important to note that both parties should understand the legal requirements and carefully screen subtenants to avoid financial or legal issues.
How Does Commercial Subleasing Work?
Commercial subleases can get complicated. Let’s take a look at the basics of how they work.
Who Pays the Rent?
In a commercial sublease, the subtenant (sublessee) pays rent to the original tenant (lessee). For example, if the tenant pays $2,000 per month to lease a commercial space, the subtenant will pay all or a portion, whatever the contract states. In exchange, the they’ll have access to the space that they pay for.
What’s the Landlord’s Role?
Most commercial leases require the landlord’s written consent before subleasing. This allows landlords to ensure the subtenant:
- Is financially stable
- Uses the space appropriately
- Will not damage the property or violate zoning rules
Some landlords may also charge a sublease fee. To help ensure a landlord stays within their bounds, freshen up on what a landlord cannot do.
In a commercial sublease, the subtenant (sublessee) pays rent to the original tenant (lessee). For example, if the tenant pays $2,000 per month to lease a commercial space, the subtenant will pay all or a portion, whatever the contract states. In exchange, the they’ll have access to the space that they pay for.
Understand your rights as a renter.
Pros and Cons of Subleasing Commercial Property
Subleasing can turn unused square footage into extra money in your pocket, but it’s not without a few trade offs. We’ll examine the pros and cons of subleasing commercial property.
Advantages of Commercial Subleasing
- Cost Savings: Helps tenants offset rent and operating expenses for unused space.
- Flexibility: Allows businesses to downsize, expand gradually, or test new markets.
- Avoids Lease Termination Penalties: Subleasing can be a practical alternative to breaking a lease.
- Keeps Space Occupied: Reduces vacancy and helps landlords maintain steady income.
Disadvantages of Commercial Subleasing
- Less Control Over Space: Landlords and tenants have limited control over subtenants’ behavior.
- Added Complexity: Subleasing involves extra paperwork and coordination.
- Liability Risks: The original tenant remains responsible if the subtenant defaults.
- Finding Qualified Subtenants: Quality subtenants can be hard to find, requiring a major time investment.
Steps to Successfully Sublease a Commercial Property
We go over the steps you’ll need to take in order to sublease your space legally and with minimal
1. Determine Your Needs
Consider your business’s current and future needs and how the sublease arrangement will fit into your overall strategy. Assess the space you want to sublease, what you’ll need to charge, and any potential issues you may run into.
2. Review Your Lease
Take a look at your lease or talk to your landlord. Your original lease may forbid subleasing the property. However, if your lease agreement does not expressly forbid it, you should check for any other language that may affect your ability to rent out some or all of your space.
3. Get Approval
Landlords typically require the ability to approve any sublease in order to ensure their property (and rights) are protected. That’s why it’s important to review your lease to make sure you even have the right to offer your space for sublease.
4. Set Your Price
Base your rate on your location, space, and current market conditions. It is also important to consider your financial needs. Taking on the risk of subleasing your space has to make sense for you and your business.
5. Advertise Your Space
If you don’t already have a tenant in mind, market your space through social media, word of mouth, or even place an add in your local commercial real estate listings.
6. Screen Potential Tenants
Conduct interviews, request references, and perform background checks to ensure the new tenant is a good fit for the space, can meet financial obligations, and won’t harm your business or your original lease.
7. Make It Legal
Now isn’t the time for DIY legal work. Draw up a sublease agreement that covers everything: rent, length of lease, maintenance, insurance, and what happens if things go south. Make sure it aligns with your original lease. Have your attorney review it. Submit the sublease agreement to the landlord for approval. Once the landlord approves the sublease, finalize the agreement with the subtenant.
Frequently Asked Questions
Subletting and assigning a lease are not the same thing. With a sublease, the original tenant stays on the lease and keeps all responsibility. With a lease assignment, the original tenant hands over the lease completely, and the new tenant pays rent directly to the landlord and takes full responsibility.
Since you’ll be creating additional income with your sublease, you’ll need to report it as taxable income to the IRS. Depending on what state and city you’re located, sales and property taxes may be affected. However, some expenses related to the sublease (property improvement, advertising costs, legal fees) may be deductible.
If a subtenant fails to pay rent or violates the sublease, the original tenant remains fully responsible to the landlord under the original lease. This means you must continue paying rent even if the subtenant defaults.