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Assigning an Office Space Lease - what you need to know

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One of the office lease clauses tenants should pay attention to is the assignment clause. The basic idea behind the assignment clause to allow the tenant to assign the entire lease to a sub-tenant, the assignee, if need be. Typically, an assignment will require the landlord's approval in writing. The assignee must be qualified and the assignment is made without the release of the assignor’s liability. What this means is that you, the original tenant, will still be financially responsible to pay the rent in the event the assignee fails to make payments. This can add quite a liability on your financial statement.

There are ways to try to get around this. The first and foremost important requirement is that the assignee's financial statement is comparable or better to that of the original tenant’s. If that is the case very often you can negotiate with the landlord to a release after a period of time in which the assignee has paid rent on time and that the assignee is never in default of the lease during that time period. Another way to achieve a release is through a buyout option. If the subtenant is creditworthy you could offer the landlord a sum of money to release you from any future obligation.

Of course, the best way to go about this is to engage the services of a tenant representative when you anticipate the need to assign the lease, whether it is to downsize or to upsize. Tenant reps not only are intimately familiar with the market in helping you relocate, but also knowledgeable about the landlords in the area and what they may be willing to negotiate. If the tenant rep has brought other tenants to the building, the landlord may be interested in staying on their good side, in order to bring more future business.

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By: James Osgood

Office Leasing Tips , Office Rental , Office Space Negotiations

1 response to “Assigning an Office Space Lease - what you need to know”

  1. Sarah Editor Says:
    Finding office space is becoming an increasingly challenging process for sole traders, small businesses and even larger organisations.Don't be rushed into making a decision if you're not fully comfortable. And if the lease negotiations don't quite come out as you planned – be prepared to walk away. There are always other properties that may better suit your needs.