“We thought we had minimized risk by subletting. Instead, we inherited someone else’s disaster—without a safety net.“
The Setup: A Seemingly Smart Sublease
We had more space than we needed, so subleasing was the logical move. The subtenant passed the financial review, signed on quickly, and took over the suite. Revenue came in, and the space was no longer a drag on the budget.
Everyone was happy—until the checks stopped.
The Chain Reaction
The subtenant missed a payment. Then another. We reached out—no response. Eventually, we learned they had vacated the space entirely. But that wasn’t the worst part.
Buried in our original lease was a clause: “Tenant shall remain liable for all obligations in the event of subtenant default.”
The landlord acted fast—penalties, legal fees, and a notice of default directed at us.
The Scramble to Recover
We tried to argue that the subtenant’s abandonment absolved us. But our own lease made it clear: the risk never left our court. Worse, we hadn’t required the subtenant to carry their own indemnity.
Our legal team worked overtime to negotiate a settlement. We were left managing cleanup on a space we thought was off our books.
The Costly Consequences
We ended up paying not only back rent and penalties—but also legal costs and fees to re-secure the space. And we still had to find a new subtenant, or eat the cost ourselves.
What looked like a financial win quickly became a reputational and legal mess.
Lessons Learned from the Sublease Trap
- Always review master lease clauses before subleasing—no exceptions
- Require subtenants to carry insurance and indemnification
- Treat subleasing like a new lease, with all the same diligence
Don’t Let Subleasing Become a Liability
Space optimization is smart—but only when backed by airtight legal structure and oversight. Otherwise, your cost savings may just be borrowed time.
This is Episode 6 of the Lease Administration Nightmares series.
Coming soon: Conflicting Clauses, Confused Payments
Need help reviewing your sublease risks?
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#LeaseAdminNightmares | Real Mistakes. Real Lessons. Real Results.
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