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Four Tips for Subleasing Office Space

Those offices you're paying for and not using can bring in some extra cash. But being a landlord can be tricky business.

This story appears in the March 2011 issue of Entrepreneur. Subscribe »

Those offices you're paying for and not using can bring in some extra cash. But being a landlord can be tricky business, if it's allowed at all.

For companies that have downsized or find themselves with more space than they immediately need, subleasing that extra square footage might make sense. But subleasing isn't as simple as finding a tenant and collecting a check, says Todd Anderson, senior managing director at CB Ellis, a commercial real estate firm in Los Angeles. Keep these cautions in mind:

Check what rights you have in your lease. If you don't own your building, your landlord may not allow subleasing, may limit the types of businesses to which you can sublease or may stipulate the rent at which you can sublease, because the building doesn't want to compete with its own tenants for new occupants, he says. Those conditions may also change depending on the occupancy levels of the building.

Make sure the space is suitable. Anderson suggests checking that the space, once divided, meets fire and exiting codes. If the space does not, you may not be able to sublease it.

Check with your neighbors. If your lease and space allow you to sublease, check whether tenants in your building need more space. They're often more motivated to choose adjoining or nearby space and may be able to move in sooner, especially if they're in too-tight quarters, Anderson says.

Look for suitable tenants. Cast a wider net if no neighbors can take your space. However, be sure that the businesses you consider won't be excessively noisy or engage in practices that are against your building's rules. Checking their financial stability is also critical, he says. Ask for audited financial statements, credit references and a bank reference.

If you rent your space from someone else, it's likely that the landlord will require final approval once you find a prospective tenant, so be prepared for that extra step.

Gwen Moran

Written By

GWEN MORAN is a freelance writer and co-author of The Complete Idiot's Guide to Business Plans (Alpha, 2010).