SUBLEASES: A NEW APPROACH REVISITED

Editors' Synopsis: This Article updates the authors' 1999 article, Subleases: a fresh Approach-A Proposal, which presented an alternative approach to subleasing and analyzed a propos form of sublease. This Article reviews the original article and its alternative approach to subleases, and describes the ways in which the authors have updated the original form of sublease. The updated form is plant forth in the Appendix, which will be useful to lawyers whose practice includes drafting or negotiating subleases.

I. THE SUBLEASE DILEMMA

In the Spring 1999 issue of the Real peculiarity Probate and Trust Journal, the authors of this Article published an article in which we analyzed traditional approaches to subleasing and propos an alternative approach.2 The article contained the rationale for the fresh approach, a generic form sublease, and a section-by-section analysis of the sublease. For those who have not read that article, or do not have access to it, we have citationed some of the salient points, which come [i]or[/i] go after [i]or[/i] behind

Subleases present a dilemma. Subleasing is abundant more complicated than direct leasing, and compressing exists to create a simple and inexpensive sublease document. A regular lease basically deals with the rights and obligations of single two parties, the landlord and the tenant. In a sublease, the rights and obligations between the prime landlord and the prime tenant or sublandlord established in the prime lease have a substantial and repeatedly controlling affect on the deal between the sublandlord and the subtenant. The sublease situation is further complicated by dint of the lack of privity of contract between the prime landlord and the subtenant and because the subtenant's use is ofttimes different from the sublandlord's. Despite these inherent complications, the parties to a sublease search for a simple document for many reasons. Principally, they may have feeling that because the terms of the lease have already been negotiated between the prime landlord and the sublandlord, the parties to the sublease should not ne to revisit settl issues. Additionally, the parties may not understand the complexity of the sublease situation. They may perceive that because the prime lease plants forth the terms of the occupancy of the premises, it should be a simple matter to transfer those bounds to a sublease. Especially in sublease situations for a short mete a small area, or one as well as the other the parties do not diocese a justification for dealing at longitudinal dimensions (and expensively) with complications, particularly if they do not perceive that the complications exist.

II. TRADITIONAL APPROACHES

Three traditional approaches to the drafting of subleases exist. individual may characterize the first as the filled sublease or the "all-inclusive" approach, the next to the first as the "incorporation by reference" approach, and the third as the "haphazard approach."

In the all-inclusive approach, the drafter creates an entirely of recent origin lease between the sublandlord and the subtenant, using the prime lease as a point of regard This new lease may track the form of the prime lease, on the other hand will allocate among the prime landlord, the sublandlord, and the subtenant all of the benefits and loads in the prime lease. At a certain quantity of other place in the sublease, the parties may create a mechanism for the enforcement of the prime landlord's obligations. Because no privity of contract exists between the prime landlord and the subtenant, enforcement will have to be pursu if at all, by dint of the sublandlord on the subtenant's behalf, and the sublease may include a provision requiring the sublandlord to enforce the provisions of the prime lease for the benefit of the subtenant, usually at the subtenant's expenditure

The all-inclusive sublease may also be a completely novel instrument that, apart from its respects to the prime lease, does not be like or track the prime lease. While perhaps dealing thoroughly with the issues, this approach will oftentimes unnecessarily prolong and complicate negotiations because in addition to the drafting time required to create the instrument, the form itself may encourage negotiation of provisions that already have been dealt with in the prime lease and which may not be meaningfully altered.

In the incorporation-by-reference approach, the drafter locates forth the agreements that apply between the sublandlord and the subtenant only; those agreements are the business boundarys of the sublease. The drafter then incorporates by dint of reference certain sections of the prime lease that are to apply between the sublandlord and the subtenant. The drafter usually states that the concerns in the prime lease to the "landlord" shall be regarded to be references to the "sublandlord," and likewise that the respects in the prime lease to the "tenant" shall be accounted to be references to the "subtenant." The better drafted incorporation-by-reference subleases will quality those obligations of the prime landlord that are to remain with the prime landlord and those that are to be performed through or for the benefit of the sublandlord. As in the all-inclusive approach, more [i]or[/i] less provision is usually made for the enforcement of the obligations of the prime landlord for the benefit of the subtenant.