Subleasing is when a property is leased by a Lessor to another party, the Lessee, who then surrenders or sub leases a portion (in some special cases a whole of the premises) to a third party or Sub-Lessee. In this process the current tenant the Lessee becomes the Sub-Lessor and the incoming tenant becomes the Sub-Lessee.

Before entering a sublease, the existing head lease terms and conditions must to be considered. The Lessor usually has to consent to such a sublease. Rules and regulations expressed throughout the head lease need to be respected by both the Sub-Lessor and Sub-Lessee. However, a sublease can also contain very different terms to that of the head lease.

The differences can occur in the structure of the lease itself, financial arrangements or be of a practical nature (ie sharing facilities and services, parking arrangement etc). The sublease cannot grant the Sub Lessee greater rights that the Sub Lessor has under the head lease.

Of importance is the expiration of the initial term of the sublease cannot exceed the expiry date of the current term of the head lease.

The drafting of the majority of subleases is often more complex due to the need to involve three parties and also take into account the head lease.

More complex and unforeseen matters can arise during a sublease (such as the incompatibility of businesses, safety and security concerns, potential breaches of the head lease – just to name a few).

Accordingly seeking professional assistance is extremely important in case of considering a sublease and highly recommended.