In the Spotlight

Tenants that seek the future ability to sublease a portion of their space frequently settle for language to the effect that the landlord will not unreasonably withhold, delay, or condition its consent to a proposed sublease by the tenant. Unfortunately, this typical language only provides a tenant with minimal protection. Most sophisticated prospective subtenants of large premises will seek a nondisturbance or recognition agreement from the master landlord, assuring the subtenant that, in the event of a default by the sublandlord or other event giving rise to the termination of the master lease, the subtenant may continue to occupy the sublet premises pursuant to the terms of the sublease. Particularly where a subtenant is investing significant tenant improvement dollars in the subleased space, or the location of the subleased space is important to the subtenant's business, the subtenant needs the assurance of such a nondisturbance or recognition agreement to ensure that the terms of its sublease remain in effect for the entire sublease term.

An aggressive or ornery master landlord that wishes to hamper its tenant's ability to sublease will either refuse to provide such a nondisturbance or recognition agreement or insert conditions in the proposed agreement which are unacceptable to most subtenants. Such conditions may include a requirement that in the event of a termination of the master lease, the subtenant must assume liability for the entire leased premises, as opposed to only the subleased premises, for the balance of the entire lease term, as opposed to the sublease term. Such a condition may effectively prevent a tenant from subleasing its space upon reasonably favorable terms. Potential tenants with leverage may wish to consider inserting a requirement in their lease that obligates the landlord to deliver a commercially reasonable nondisturbance or recognition agreement to any subtenant that otherwise meets the requirements described in the lease.

Tenants that seek the future ability to sublease a portion of their space frequently settle for language to the effect that the landlord will not unreasonably withhold, delay, or condition its consent to a proposed sublease by the tenant. Unfortunately, this typical language only provides a tenant with minimal protection. Most sophisticated prospective subtenants of large premises will seek a nondisturbance or recognition agreement from the master landlord, assuring the subtenant that, in the event of a default by the sublandlord or other event giving rise to the termination of the master lease, the subtenant may continue to occupy the sublet premises pursuant to the terms of the sublease. Particularly where a subtenant is investing significant tenant improvement dollars in the subleased space, or the location of the subleased space is important to the subtenant's business, the subtenant needs the assurance of such a nondisturbance or recognition agreement to ensure that the terms of its sublease remain in effect for the entire sublease term.

An aggressive or ornery master landlord that wishes to hamper its tenant's ability to sublease will either refuse to provide such a nondisturbance or recognition agreement or insert conditions in the proposed agreement which are unacceptable to most subtenants. Such conditions may include a requirement that in the event of a termination of the master lease, the subtenant must assume liability for the entire leased premises, as opposed to only the subleased premises, for the balance of the entire lease term, as opposed to the sublease term. Such a condition may effectively prevent a tenant from subleasing its space upon reasonably favorable terms. Potential tenants with leverage may wish to consider inserting a requirement in their lease that obligates the landlord to deliver a commercially reasonable nondisturbance or recognition agreement to any subtenant that otherwise meets the requirements described in the lease.