Expert: Jim Avancena, CPM - 10/22/2007

Question
I currently own a business that is located in a 1200 sq. ft. space.  I have a 3 year lease and I have only been here in business for one year.  I am not going to sell the business, so how do I find someone to take over the space?

Answer
Caroline-
This should be a very long and involved answer, others have written books that answer your question.

Since I don't know a lot about the other characteristics about your business I will be very general.  

First, check your lease and see if you are allowed to SUB-lease it to other tenants in the shopping center or office building where you are located.   Many leases stipulate that you first have to offer your space back to the landlord to take back and that you may not sublease your space to other tenants in the same property.  Check that first.

If possible and acceptable with the terms in your lease, ask the tenants on either side of your space if they are interested in taking all or a portion of your space.  Then ask other tenants in the same property if they are interested.  

If that does not work, and if your lease does not limit you from doing so, put up a large paper "FOR LEASE" sign in the front window if you have a store.

You can advertise your space for lease in the columnar classifieds - usually under "Office Space For Rent" or Lease, be sure to note that it is "Short Term" space (i.e., less than a three year term).   

Usually, a lease will stipulate that your subtenant be approved by the landlord.  Check your lease, it will have language in it that addresses exactly what you can and cannot do to sublease your space.  This is to avoid having questionable tenants become occupants of the property.  When you talk to potential subtenants, be certain that what they will do in the premises is legal, and that the landlord will find them acceptable.  Also, for your own interest, be sure that the subtenant you find has the ability to pay the rent!  You don't want to move out and then find out that your subtenant doesn't pay the rent.  Then you will have to spend your funds to evict them in court, and that is expensive and a nightmare to execute.


Be objective and determine if what you are paying for the lease each month is above or below the true "market" rent at this point in time.  If you ask around to other tenants in the property where you have your lease, and most of the tenants indicate they are paying more or less than you are paying in rent, this should give you your answer. Note however, sometimes another tenant may be paying more rent that you are because the landlord put extra improvements into their store or suite, and the increased rent reflects the added marginal rent that tenant is paying the landlord for the extra improvements.  So be sure to ask others paying more than you if there is some unique reason they are paying a higher rent than you.

Another reason to talk with the other tenants is because they may inadvertently help you lease your space.  If they know you are trying to sublease your space, they will likely mention that to anyone they talk with that says they are looking for space.  

If you are paying more than most other tenants in the property, you may need to sublease your space for less than your lease requires.  If so, you will need to make up the difference each month.

If you had a broker(real estate agent) represent YOU in leasing your space; and I don't mean the broker that represented the landlord in the transaction, ask your broker (ONLY), for their help in subletting your space.  You will most likely need to pay your broker double the commission usually paid for a lease to get them to sublease your space now.  Remember, each month that you don't find a sublessee to take over your space, you have to pay another month of rent - so the idea is to Sublease it as quickly as possible.  

Another possibility is to ask your landlord to let you out of your lease immediately if you will pay them a "lease termination fee" equal to three to six months of rent - if you can afford it.  Usually this will work if the demand for space like yours is high, because the landlord will take your termination fee believing that he can release your space in only a month or two and he will come out ahead in the deal.  If the market for your space is only lukewarm or soft, the landlord will probably not be interested unless he happens to know of someone that might want to lease it.

Whatever you do, take action to do something to resolve the matter of subleasing immediately.  It will take you time to find a subtenant, and a new tenant will probably not be ready to move in for at least a month after the sublease is agreed to.

Additionally, landlords are usually relentless in their efforts to collect the rent your lease requires - even if you have gone out of business.  Not only will they keep your security deposit, they will likely continue to chase you in court to collect the rent until the lease is over or until a new tenant takes the space.

Most geographic areas in the US require the landlord to mitigate damages, which in your case means that even if you move out and stop paying the rent, the landlord must then make his own efforts to find a tenant for your now vacant space.  The landlord cannot just use the courts to make you pay your rent, they must also be able to show that they are taking real steps to find a new tenant for your space.  

Your situation can be a very difficult one, and it often gets very much more difficult than the limited situations that I have described here.   I hope you can induce a real estate agent to assist you, but it will be difficult.

Good luck,

-Jim