What This Liability Means

As a sublandlord (the original tenant subleasing to another), you remain fully liable to the master landlord for all lease obligations. If your subtenant defaults, you owe the master landlord — and must pursue the subtenant separately. You have double exposure: upward to the master landlord and downward to the subtenant.

Dollar Example: $5,000/month master lease, $4,500/month subtenant, subtenant defaults in month 6

Real Dollar Example

Scenario$5,000/month master lease, $4,500/month subtenant, subtenant defaults in month 6
Exposure$90,000 master lease remaining + subtenant recovery uncertainty

You owe $5,000/month to the master landlord regardless of subtenant payment. Subtenant recovery requires separate litigation.

Worst Case Scenario

Subtenant causes significant damage, stops paying rent, and abandons. You owe master landlord full rent plus restoration. Subtenant has no assets. You bear the entire loss.

Warning Signs in Your Lease

  • Subtenant with weak financials or no operating history
  • Sublease at below-master-lease rate — you're subsidizing the difference

How to Limit This Liability

  • Require subtenant security deposit equal to 3 months sublease rent
  • Mirror all master lease obligations in the sublease agreement

Frequently Asked Questions

What due diligence should I do on a subtenant?
Same financial review as the master landlord did on you: credit check, business financials, personal financial statement, and references from prior landlords. A financially weak subtenant creates massive exposure for you.
How does sublease approval work?
Most commercial leases require written landlord consent for sublease. The landlord reviews the subtenant's financials and can approve or deny based on reasonable financial criteria. Allow 30-60 days for the approval process.
Can I sublease for more than I'm paying?
Yes — subleasing at a profit is permitted unless the lease restricts it. Some leases require you to share sublease profit with the landlord ('50% of any sublease profit'). Review the sublease provision for profit-sharing requirements.
What happens if my subtenant violates the master lease terms?
The master landlord can declare you (the original tenant) in default for the subtenant's violations. Your subtenant's lease violation is your problem. Ensure the sublease agreement mirrors all master lease restrictions.
Does sublease terminate my personal guaranty?
No. Your personal guaranty on the master lease remains fully effective. Subleasing doesn't release you from any obligation — you've just added another layer of responsibility (as sublandlord) on top of your existing personal liability.