3 Things to Know Before Subleasing Your Office Space

Barbara Weltman — Sun, 18 Sep 2011 21:47:40 +0000

Link:

http://www.openforum.com/articles/3-things-to-know-before-subleasing-your-office...

If you are relocating and can’t get out of your lease or have downsized because of the economy and want to defray some of the rent, consider subleasing to another business. This can help tremendously with your cash flow.

1. Determine if You are Permitted to Sublet

Check your lease to make sure you are permitted to sublet. A specific sublease clause may limit the amount of space you are permitted to sublet, such as 25 percent. If you sublet more space than you are allowed to, the landlord usually has a “right of recapture” to take back your unused space and lease it out directly. Whether the landlord exercises the right depends on the commercial realty market. According to Cushman & Wakefield, office vacancy rates in major markets have declined by 71 percent since 2007. You’ll need to check with your landlord about intentions to recapture space you no longer want.

If you are trying to get out of your entire space because you have decided you (and any employees) can work from home and drastically cut overhead, are simply relocating, or going out of business, again, you may or may not be able to do so. If the landlord has the right of recapture and is willing to exercise the right, it may be better to let this happen so that you avoid the obligation of staying on top of collecting rent from the subtenant. However, in a tough market, you may be paying the landlord more than could be charged for re-leasing the space, so you’ll be stuck for the time being.

2. Decide What to Charge

Typically, you cannot expect to receive the same amount of rent you’re paying for the space because subtenants are looking for bargains. However, in markets where commercial space is at a premium and you’re in a position to charge more than your actual rent, you may have to split any profits with the landlord.

Check your lease to see whether there is such a provision to split rents from a subtenant exceeding your rental amount and what the split is (such as 50-50). Look to see whether the split is net of any expenses, such as advertising, commissions, and legal fees, which you’ll probably incur to find a subtenant.

3. Finalize the Arrangement

Depending on the amount or type of space you’re subleasing, you may be required to make some structural changes to your space to accommodate a subtenant. For example, if you have a suite of offices and want to sublet one of them, you may have to put up a barrier and give that office access to a hallway. Any changes you make must, of course, conform to the building code.

You also need to make a contract with the subtenant for the space. The contract may be a sublease for a percentage of your space. Alternatively, you may contract to allow another business to use a desk within your office. This is called a “desk-sharing arrangement.” Be sure your agreement spells out what services and access this subtenant may be entitled to, such as use of the receptionist, a kitchen area, and the photocopier.

Bottom Line

Don’t try to write a sublease yourself. Work with a real estate agent who can make sure the agreement conforms to your existing lease and protects your interests.

If you want to learn more about becoming a subtenant, see last week's, What to Know about Subleasing Office Space.

This article is from Barbara Weltman of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread:

20 Tips for Getting Your Security Deposit Back

Andrea Karim — Sun, 15 Apr 2007 18:49:54 +0000

Most of my landlords have been really great, but I did experience one rather unethical property manager who tried to bilk her tenants out of every dime they had.

Before moving out of my North Seattle apartment, I cleaned from top to bottom, bleaching the mold that formed in the closets (it was there when I moved in, and I battled it monthly), relining the cupboards with that stick-on liner so they were clean and fresh-looking. My boyfriend helped me to repair a shelf that had completely collapsed in the closet. I never wear shoes in the house, so the carpet was spotless.

When I left, I somehow managed to forget a bicycle tire on my balcony, a spare tire that I had been meaning to patch. The balcony was so moldy and terrifying that I rarely stepped out on to it, and simply forgot that the tire was there.

I was charged $75 for its disposal. And that's ON TOP OF the non-refundable cleaning service.

This wasn't exactly a swanky neighborhood in which tire disposal services run at a premium. We're talking about a musty apartment only one block from the area of town known as Crack Whore Row. And it was a BICYCLE tire, not a car tire complete with wheel and hubcap. I was pissed off that I forgot it, because I could have used it, but I didn't have the energy to fight the landlord over the charge. I wish I had, because it was completely bogus. But I didn't fight the charge, even though I now know I should have raised a stink over it.

Here are the tips I've gathered for how to be a good renter and how to get your deposit back when you move out.

Before You Move In

1. Google the leasing company, landlord's name, property name, whatever. See if you are dealing with people who are on the up and up. Check the Better Business Bureau''s online business listings for the leasing company's name (ask the landlord if they have a relationship with the BBB). The landlord that charged me $75 to throw away a bicycle tire had an awful web reputation — had I known that, I might never have rented the place to begin with.

When You Move In

2. Read your lease carefully. Understand everything that is contained therein. Note that leases are not set in stone. You can actually make alterations to them — nothing ridiculous — but if you find something in the lease that you find unreasonable (like being required to give two month's notice when you plan to leave), you can alter it, cross it out, or make additions to it.

3. Your landlord SHOULD give you a checklist of rooms and ask you to detail the condition of each one. If they don't, make one up yourself. Notice any damage that exists already (dings in wood, cupboards that don't close properly). This can be extremely tedious, so make an evening of it. Invite some friends over for a few bottles of wine (or beer) and walk around the apartment, critiquing the hell out of it.

4. If you have a digital camera, take pictures of every room, every blemish.

5. When you have gathered all of this info, written and photographic, do a walk-through with the landlord and make sure that they sign off on the list. Mail them print-outs of the photos and the room-by-room description (make sure to send the letter certified mail) and let them know that if they don't do the walk-through with you within two weeks of receiving the info, you will assume that they have signed off on your assessment.

While You Live There

6. For goodness sake, try to be clean. Get to stains before they set. If you have pets, clean the place constantly, get an air filter, open the windows, and clean up any mess as soon as you find it. Nothing is more terrifying for a landlord than walking into an apartment and seeing that your 13 cats have made the place damn near unlivable.

7. If you have a problem with any part of the apartment, if something breaks from normal wear and tear, the landlord is obliged to pay for it. If they don't, and you opt to fix it yourself (I had to replace a broken toilet seat and the bathtub caulking), take a picture of the before and after, and add it to your notes, including the cost of replacing the item. Bill the landlord for the item ASAP. If the landlord tries to bilk you later, you have more evidence of what a responsible tenant you were.

When You Leave

8. Whether or not you clean the place really depends on if you already paid a non-refundable cleaning deposit. I have never lived anywhere that didn't require me to pay a cleaning deposit. So I'll clean up anything egregious, like the aforementioned caulking (I so hate caulking), but the rest of the place, I leave broom-clean. If you haven't already paid a non-refundable cleaning deposit, clean the heck out of the place.

9. Do the whole picture thing again. Make sure that the landlord does a walk-through with you, and have them sign an agreement that you have left the apartment in fair condition. Don't feel like a jerk for doing this. You have the right to protect your money and yourself.

10. Don't assume that a super-nice landlord equals a returned security deposit. Be wary of everyone, and don't let something slip just because you think the landlord really likes you.

If a Landlord Tries to Bilk You

11. If a landlord tries to hold on to your money, demand an itemized list of the withheld money. Scrutinize it for redundancy. For instance, a landlord can't charge you to clean a carpet and then replace a carpet.

12. Also, when it comes to replacing things, you probably aren't responsible for the entire cost of replacement, unless whatever needs replacing is brand-new and you completely destroyed it. The useful life of carpeting is generally considered to be seven years. So, if the carpet was brand spanking new when you moved in, and you ruined it, you're liable for new carpet. On the other hand, if the carpet was five years old when you moved in and six years old when you moved out, you should only be liable for the amortized value of the carpet. Assuming you are responsible for damaging the carpet and it only had one year of useful life left, you should only be on the hook for about 15% of the replacement cost.

Same goes with paint: was the the paint brand new when you moved in? If not, you shouldn't be paying the full cost of a new paint job.

13. Let's say you get a bill from the landlord, and they are withholding most of your deposit for made-up charges. What do you do? Know your rights. Every state has different laws regarding just how much leeway both renters and landlords are given. Do check your state Attorney General web site to see what kind of protections are afforded to you.

14. If you think that the charges are bogus, raise a (polite) fuss. A crooked landlord is going to hope that you simply roll over and let them take your money because so many people do just that. Let them know that you believe the charges to be bogus.

15. Write your complaints down in the form of letters and send copies to an attorney, even if you don't plan to hire an attorney. Send them to your uncle the tax attorney, if you have to. I have a friend who works as an office manager in a law firm that I can send CC's to, if I need to. I address them to her, and she tears them up. Seeing a law firm's name is often enough to get people to back down, because no one wants to deal with a lawyer.

16. Don't let the landlord make you feel petty. If they try say something like, "It's only $100!", ask them why it's so important for them to take such a small sum away from you.

17. Keep as much of the communication in writing as possible. Verbal agreements (and disagreements) simply don't offer enough proof.

18. Be respectful in all of your communication. You might want to say "You cheap, cheap bastard! I lived in this ratty hellhole for two years and never complained about the skanky-ass conditions!" but you always come off better if you are polite and well-mannered. If you do have to go to small claims court, judges will look askance at written proof of your rudeness.

19. If you do decide to take a landlord to small claims court, if only to fight what you see as injustice (and keep in mind that if you win, you might be able to get your court fees paid for), do let them know ahead of time. This might avoid the hassle of actually going to court. However, don't make empty threats. Be prepared to litigate if you threaten to do so.

20. If you don't get your money back, do make sure to publicize your experience. Be reasonable, but if you truly believe that you were screwed over, let other people know. Use a site like CitySearch or Yelp to enter information about the property to warn other potential renters. Make sure that you don't exaggerate or do anything that could be construed as libel.

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This article is from Andrea Karim of Wise Bread, an award-winning personal finance and credit card comparison website. Read more great articles from Wise Bread: