Twelve questions to ask before you sign an office sublease

The head lease

1. Have I seen the head lease? Everything in a sublease sits underneath it. If the head tenant will not show it to you, that is your first answer.

2. When does the head lease end, and does it have an option? Your sublease cannot run past it. If the head lease expires in eighteen months, so does your occupancy, regardless of what the sublease says. An option to renew belongs to the head tenant, not to you, unless you negotiate a path to your own lease with the landlord.

3. Does the head lease allow subletting, and on what conditions? Most do, with the landlord's consent, which under most Australian leases cannot be unreasonably withheld. Some prohibit it, some limit it to a portion of the floor, and some let the landlord take the space back instead of consenting.

Consent and the landlord

4. Has the landlord consented in writing? A sublease signed before consent is granted can be void, and a landlord can refuse a subtenant on financial standing or proposed use. Do not fit out, do not move, until the consent is in hand.

5. Who pays the landlord's costs of consent? Landlords typically charge legal and administrative costs for reviewing a sublease. The head lease will say who bears them, and the head tenant will usually try to pass them to you.

6. What is my relationship with the landlord if the head tenant disappears? This is the question most subtenants never ask. If the head tenant goes into administration or defaults and the head lease is terminated, the sublease usually falls with it. Ask whether the landlord will offer a direct lease in that event, and get any answer in writing.

Money

7. Is the rent gross or net, and what outgoings am I taking on? If the head lease is a net lease, the head tenant pays outgoings on top of rent and will want to recover your share. Get the current outgoings figure and the basis of apportionment.

8. What bond or guarantee is required, and who holds it? A head tenant will often ask for a bond or bank guarantee sized like a landlord's. Ask where it is held and on what conditions it is returned, because the head tenant is not a bank.

9. Are there rent reviews inside the sublease term? A short sublease should not normally carry a review, but head tenants sometimes mirror their own lease. Read the review clause, if any, and match it to the term.

The space and the exit

10. What is the make-good, and whose is it? The head lease will oblige the head tenant to make good at the end. A sublease commonly passes some or all of that to you, sometimes for a fitout you did not build. Agree in writing exactly what you must remove or restore, and take dated photographs on entry.

11. Who owns the fitout and furniture, and can I change it? A fitted sublease is attractive because the fitout is there. Establish whether it belongs to the head tenant or the landlord, whether you may alter it, and what happens to anything you add.

12. Does the permitted use cover my business? You inherit the head lease's use clause. A sublease to a business outside it needs the landlord to vary the head lease, which they may decline.

When the answers are good

A sublease with a clear head lease, written landlord consent, a comfortable gap to the head lease expiry, a make-good you have seen and priced, and a stated position on what happens if the head tenant fails is a genuinely good way for a ten to twenty-five person business to take fitted space below market. Our guide to flex, sublease or direct lease puts it beside the alternatives.

Have the sublease and the head lease reviewed by a solicitor before you sign. The questions above tell you what to ask them; they are not a substitute for that review.