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Understanding right of recapture in commercial leases

Sometimes in the course of business, it becomes necessary for a business to consider subletting a space that it has leased. There are many ways that this can be a viable solution to many leased-space issues, but it is important to always consult the master lease to make sure that there are no provisions that may be problematic for those looking to sublet. Understanding potential provisions such as a "recapture right" may save headaches when considering whether to sublet a commercial space.

Recapture right provisions essentially give the landlord of a space the right to refuse a request to sublet by terminating a sublease in its entirety. Depending on the lease, there may be certain conditions that must be met in order for the recapture right to be exercised. Some leases may specify that an action as relatively small as delivering a letter regarding subletting to a landlord may trigger recapture rights, while in other cases this may not occur until a sublease is executed. Having a full understanding of all relevant provisions in a contract is vital to successful subletting.

In addition to the recapture right, it is wise for a potential sublessee to investigate what terms the sublandlord managed to negotiate with the landlord. While the sublessee is not guaranteed to receive all the same privileges that the sublandlord was able to secure, the sublessee will certainly not be able to negotiate any better terms than those originally agreed upon. The sublandlord is simply unable to grant more privileges than he or she was granted.

Subletting a commercial property can be a smart move for both the sublessee and the sublandlord, but making sure that such an arrangement is even contractually possible is a necessary first step. A qualified legal professional with experience in commercial real estate law can help protect the rights of those involved and work towards a positive solution.

Source: http://www.thespaceplace.net, "A Subtenant’s Guide to Subleasing," Douglas Van Gessel, accessed July 05, 2016

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