By Seth A. Liebenstein, partner, BBWG
Within a commercial lease, a tenant’s assignment and subletting rights are typically specifically defined with the landlord likely having the right to consent to any assignment or subletting of the premises.
Often, a tenant will attempt to negotiate into the lease the right to assign or sublet the premises without the landlord’s consent under certain circumstances, which might include a sale of the tenant’s business, a merger or consolidation of the tenant’s business with another business, or, in some cases, a “desk-sharing” arrangement.
A desk-sharing arrangement is common for smaller users such as medical practices or small law firms whereby a portion of the premises is to be utilized by a person or entity other than the tenant but that has a business relationship with the tenant. In the event that a landlord is willing to agree to such a provision within a commercial lease, there are a number of restrictions that a landlord should try to make sure are in the lease so as to maximize control over use of the premises.
First, the landlord should ensure that the portion of the premises being used by the desk-sharer is limited – typically no more than 10% at any given time. Second, the landlord should ensure that the agreement between the tenant and the desk-sharer contains specific language that extinguishes the desk-sharer’s right to occupy the premises in the event that the tenant’s lease is terminated or expires.
Third, the agreement should contain specific language that the desk-sharer is subject and subordinate to, and must comply with, all provisions of the lease. Fourth, the desk-sharer shall not be permitted to erect any demising walls so as to necessitate a separate entrance or separate access to any public corridors of the building.
Fifth, the landlord should be given a complete list of all desk-sharers as well as their contact information prior to their taking occupancy in the premises. In addition, a landlord may want to consider a requirement that the desk-sharer maintain insurance coverage in accordance with the insurance provisions of the lease, naming the landlord, any managing agent, and any mortgagee as additional insureds.
However, perhaps the most important provision for a landlord to require when allowing a tenant to enter into such an arrangement is that in no event shall the use of any portion of the premises by a desk-sharer be deemed to create any right, title or interest in or to the premises for such desk-sharer, except a license which shall cease and expire automatically without notice upon the expiration or termination of the lease.
Landlords permitting desk-sharing arrangements can make commercial space more attractive to tenants. By following a few simple guidelines, landlords can feel comfortable in knowing that they are protected from any potential misuse or abuse of the premises by such non-tenant desk-sharers.