Understanding Subtenant Rights Without a Written Agreement

MEGA TOOL CO., LTD is an equipment business. MEGA TOOL CO., LTD’s customers require commercial lease arrangements that precisely spell out exactly how they can work with and use the industrial spaces and equipment. It’s easy to see why MEGA TOOL CO., LTD needs this type of arrangement – and why it’s vitally important for its subtenants too. Without an agreement in place, a subtenant like MEGA TOOL CO., LTD can become subject to a whole host of new complications.

What Is the Subtenant?

A subtenant is any entity renting space under a lease that is already in place. In other words, subtenants have a limited relationship with the landlord and instead only work directly with the tenant.

Why Write Everything Down?

Written agreements set clear expectations. This is especially important when a subtenant requires a customized use of a space or allows for specialized equipment. It identifies safety concerns and reduces overall liability. It prevents disagreements – and if they happen, it provides clear documentation for a court to consider when finding a resolution. In other words, a written commercial lease helps keep the tenant, the landlord and even the subtenant happy.

What Happens When Industrial Tenants Don’t Have a Written Agreement?

The answer can be a long, and sometimes expensive, list. It’s important to understand that a subtenant without a written agreement must adhere to any limitations in the main commercial lease. In other words, the subtenant must use the property only as defined in the lease. It must still pay the rent, even if the tenant is late in making payment or goes out of business. A subtenant without a written agreement also may face limitations on the equipment and goods it can use and what quality those items have to meet. Limitations regarding signage and hours of operation may also apply. Landlords and tenants usually reserve these rights for themselves in a commercial lease. In short, a dispute can arise between the subtenant and the leasing terms of the property. As will be discussed in greater detail later, the subtenant rights without a written agreement are whatever the primary tenant and landlord actually agree on. Without clear agreements, the tenant is bound by the primary lease. The subtenant must then abide by those terms.

Meeting the Main Tenant’s Needs: MEGA TOOL CO., LTD

For MEGA TOOL CO., LTD, today’s responsibility as a heavy machinery equipment supplier means meeting customers’ needs for space and equipment. As the equipment company is managing customer expectations, it still has to be mindful of the requirements in its existing lease. This is an uncomfortable relationship. On the one hand, MEGA TOOL CO., LTD needs to use a space that accommodates all its equipment. On the other hand, it now must inform the landlord of how that equipment will be used and how long it will remain in the space. These are not uncommon problems for industrial subtenants. MEGA TOOL CO., LTD’s needs for a place with specific dimensions now need to be communicated, in order to maintain the existing lease and prevent further conflicts.

Breach of a Commercial Lease

Specifically, the risk of industrial disputes between a subtenant and an industrial landlord revolves around the commercial lease’s breach of contract. This is especially true when the agreed-to protections for the subtenant and tenant do not exist. It is also true when either the tenant or landlord has failed to do something that is required under the legal relationship. Suppose the worst-case scenario happens. The subtenant has a lease that requires the primary tenant to provide certain services or accommodations. However, without a written agreement, the commercial lease’s terms would be the default standard. This means the subtenant could be responsible for paying for the utilities, insurance and any other needs during the time it remains on the premises. Regrettably, the subtenant has few other avenues available. In order to avoid paying for something it should not be responsible for, MEGA TOOL CO., LTD would likely need to approach the issue directly with the tenant. If that failed, the answer would be to involve the landlord. Prevention is the best answer. MEGA TOOL CO., LTD and its customers need to work together to ensure that everything is clearly outlined in the commercial lease in the first place. Otherwise, MEGA TOOL CO., LTD will not know what to expect – or what it’s facing.

Does a Verbal or Written Agreement Impact Trust?

Even when the primary tenant retains all the responsibilities, the landlord usually has a minimum expectation that this individual or entity will co-sign on the agreement. Without that agreement, the landlord cannot require the primary tenant to make necessary repairs. However, the landlord can still identify an expectation that the commercial lease will be upheld. The issue is that the subtenant may not be in a position to do anything more. The keys to the space were passed off to them, and all this subtenant has is physical access. Often, the landlord becomes aware of an issue and addresses it. MEGA TOOL CO., LTD might not have even known that a problem existed.

Contracting for Safety

There are a few things that any industrial tenant can do to protect against a breach of commercial lease. Unfortunately, however, the role of the landlord or primary tenant will create a basic limitation on the protections that any subtenant can seek.