Tenant - Sublease

[foleyt]

What is the name of your state? CO
We have a tenant that we rent the back of our building to, we have no problem allowing him to sublease his space (allowed in lease) due to the fact that he does not need it any longer (24 months remaining on lease).
We will of course, according to the lease, review who he wants to sublease it to.

The question is, is it better practice to collect the rent from our tenant so he remains responsible according to the personal guarantee on the lease and not to collect money from the sublease tenant?

 

[Zigner]

What is the name of your state? CO
We have a tenant that we rent the back of our building to, we have no problem allowing him to sublease his space (allowed in lease) due to the fact that he does not need it any longer (24 months remaining on lease).
We will of course, according to the lease, review who he wants to sublease it to.

The question is, is it better practice to collect the rent from our tenant so he remains responsible according to the personal guarantee on the lease and not to collect money from the sublease tenant?

"Better" is entirely subjective. If it were me, I'd collect from the new tenant. If you don't do it that way, and the old tenant collects the rent then disappears in the night, you'll have an even bigger can of worms.

Frankly, I'd consider releasing the prior tenant from the lease and signing a new agreement with the incoming tenant.

 

[PayrollHRGuy]

But on the flip side of Zigner's point is that if the sub-tenant pulls out the tenant still owes for the space.

A lot will depend on the personal guarantees that are in the lease.

 

[Zigner]

But on the flip side of Zigner's point is that if the sub-tenant pulls out the tenant still owes for the space.

Yes, that is true. The original tenant would remain as a guarantor.

A lot will depend on the personal guarantees that are in the lease.

Agreed. Special attention should be given to the ability of the guarantor to "make good" on whatever guaranty is provided.

 

[zddoodah]

The question is, is it better practice to collect the rent from our tenant so he remains responsible according to the personal guarantee on the lease and not to collect money from the sublease tenant?

This post raises no legal issue. That said, I would imagine it would be better for you -- but not for the tenant -- for you to get the money directly from the subtenant.

 

[adjusterjack]

The question is, is it better practice to collect the rent from our tenant so he remains responsible according to the personal guarantee on the lease and not to collect money from the sublease tenant?

Whether you can collect rent from the subtenant depends on the terms and conditions of your lease.

Unless your lease says otherwise, you tenant can become landlord to his subtenant, collect rent from his tenant and then pay you. In theory, your tenant can charge more to his subtenant than he's paying you. For example, if your rent is $1000 a month, he could charge $1500 to his subtenant, pay you the $1000 and keep $500 a month profit for himself. Quite common.

I'm surprised that the twozies didn't pick up on that.

 

[Zigner]

Whether you can collect rent from the subtenant depends on the terms and conditions of your lease.

Unless your lease says otherwise, you tenant can become landlord to his subtenant, collect rent from his tenant and then pay you. In theory, your tenant can charge more to his subtenant than he's paying you. For example, if your rent is $1000 a month, he could charge $1500 to his subtenant, pay you the $1000 and keep $500 a month profit for himself. Quite common.

I'm surprised that the twozies didn't pick up on that.

The OP mentioned that subleasing was allowed by the lease, so I didn't go down that road. I do agree with you on the remainder of what you posted.

 

[quincy]

What is the name of your state? CO
We have a tenant that we rent the back of our building to, we have no problem allowing him to sublease his space (allowed in lease) due to the fact that he does not need it any longer (24 months remaining on lease).
We will of course, according to the lease, review who he wants to sublease it to.

The question is, is it better practice to collect the rent from our tenant so he remains responsible according to the personal guarantee on the lease and not to collect money from the sublease tenant?

This is a business decision rather than a legal decision, with the decision limited only by the terms and conditions of the lease you have with your tenant. Assuming that the lease leaves you free to collect rent either way, you need to consider the pros and cons of each way and decide what is the better practice for you.

 

[foleyt]

Thank you everyone for all the valuable information.
Everyone brought up some great points, I think it may be time to get my lawyer involved, he's also the one that wrote up the Contract/Lease.

 

[Litigator22]

This post raises no legal issue. (?) . . . . .

Begging your pardon fellow counselor, but I strongly disagree!

There are indeed significant legal issues with differing legal implications regarding future liabilities and rights attending the matter of a leasehold transfer. All of which must be carefully reviewed and duly considered by the practitioner in the drafting of the related documents.

An extensive review of the subject with citations of authority can be found here:

https://www.bradley.com/insights/ publications/2003/09/assignments-and-subleases-the-basics