A sublease is an arrangement in which an existing tenant (the sublandlord) leases all or part of their leased space to a third party (the subtenant), while remaining fully responsible to the original landlord under the terms of the primary lease. Subleasing lets a tenant offload unneeded space — due to downsizing, relocation, or excess capacity — without terminating their original lease obligation.
How subleasing works
The original tenant remains contractually liable to the landlord for the full lease obligation regardless of whether a subtenant is paying rent, defaults, or vacates. This means the sublandlord bears the credit risk of the subtenant while still owing full performance under the primary lease — a key distinction from an assignment, which can fully transfer obligations to a new party.
Most commercial leases require landlord consent before subleasing, and many include a right for the landlord to recapture the space (taking it back directly) rather than approving a sublease, particularly if the proposed subtenant or sublease terms aren't favorable to the landlord.
Sublease vs assignment
| Structure | Original tenant's ongoing liability |
|---|---|
| Sublease | Remains fully liable to landlord under original lease |
| Assignment | May be released from liability if landlord consents to full transfer |
What to watch for before committing
Landlord consent requirements
Confirm the exact process and timeline for obtaining landlord consent to sublease, including any grounds on which they can reasonably refuse.
Recapture rights
Check whether the lease gives the landlord the right to recapture the space instead of approving your proposed sublease — this can derail your plan even with a subtenant lined up.
Ongoing liability exposure
Understand that subleasing does not release you from your original lease obligations — you remain on the hook if the subtenant defaults.
Subtenant creditworthiness
Vet the subtenant's financial strength carefully, since their non-payment becomes your problem under the primary lease.
Use restrictions and permitted use
Confirm the subtenant's intended use complies with both the original lease's permitted use clause and any zoning requirements.
Profit-sharing clauses
Some leases require the tenant to share any profit earned from subleasing at a rate higher than the original rent — check for this provision.
When you need to know this
- Downsizing operations — offloading excess space without breaking the original lease term
- Relocating before lease expiration — recovering some cost from unused space during a transition to a new location
- Temporary capacity needs — subleasing to another business for a shorter period than your own remaining lease term
- Evaluating exit strategies — understanding subleasing as an option when planning for potential future space changes
Frequently asked questions
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