Subleases - A Risky Business in an Uncertain Economy

DID YOU KNOW?

that a sub-tenant's rights vary depending on whether there is:

A. a bankruptcy of the tenant;
B. a termination of the tenant's lease; or
C. a surrender of the headlease?

A Primer:

A sub-lease is a lease by the tenant to its own tenant of all or a portion of its premises for less than the balance of the tenant's term. In most cases, the landlord's consent to the sub-lease is required.

Landlord's Consent:

Absent a lease provision to the contrary, a landlord cannot nreasonably withhold its consent to a transfer including a sub-lease (s. 23 of the Commercial Tenancies Act Ontario (the "CTA").

Bankruptcy of Tenant and S. 39(2) of the CTA:

S.39(2) of the Act provides that where a sublease has been entered with landlord's consent prior to the bankruptcy, then, upon the bankruptcy, if the bankrupt's trustee surrenders, disclaims or elects to assign the lease, the sub-tenant can elect within 3 months of the bankruptcy to assume the lease with the same liabilities and obligations as the bankrupt tenant except for the rent which will be the greater of the rent under the head lease and the rent payable by the subtenant under the sublease.

For the complete article view the document below.