Commercial tenants that outgrow a rental unit may find larger areas and move their operations there. Under an existing lease agreement, however, a tenant may still face liability for monthly rent payments.
To avoid paying double rent, a tenant may find another business willing to take over the lease. As noted by the Los Angeles Daily News, when commercial tenants sublease, they remain responsible for the rent if a sub-tenant fails to pay. Landlords may also have some alternative options to consider.
A property owner may reduce the risk of default
A rental agreement may specify when a landlord may begin marketing a space to attract a replacement tenant. Depending on the amount of time left on the lease, a landlord may modify the unit to meet market demands and appeal to a long-term tenant.
Rental units, for example, may become smaller to accommodate a number of different commercial tenants sharing what was once a much larger space. By offering less square footage at attractive rates, a landlord may find it profitable to terminate a lease rather than rely on a single tenant. Dividing the area may also reduce the risk of financial losses if any of the new tenants’ businesses fail and cause them to default.
Creativity could result in new types of tenants
As reported by CNN, some vacant shopping mall owners looked beyond traditional retail tenants and began offering empty spaces to different types of growing businesses. Doctors, schools and storage facilities have all signed lease agreements for space located inside shopping malls.
The terms of a commercial lease may require some flexibility when market conditions appear uncertain. A lease may proactively highlight the conditions for modifying or terminating an agreement amicably. Avoiding landlord and tenant disputes could result in workable solutions that mitigate the risk of loss to both parties.