Are you wanting to get into the real estate game but don't know any of the lingo? Parse through this plethora of lessons where you will learn the meaning and specific application of dozens of real estate terms taught by the incredibly successful Michael Burer.
Featured Coaching Excerpt - Notes & Transcript, Part 1
Lesson Nugget: A sublease is when the original tenant decided to lease their usable space to another tenant.
Sublease: A lease in which the original tenant (lessee) sublets all or part of the leasehold interest to another tenant (known as a subtenant) while still retaining a leasehold interest in the property. Also known as a sandwich lease due to the sandwiching of the original lessee between the lessor and the subtenant.
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-All right. I am Clay Clark and weare here today on Thrive15.com, one of the alternatives to lynda.com, joined with Michael There-is-no-real-estate-topic-too-obscure Burer, talking about a thing called subleasing, a thing that affects the national security of our country. I worry when America begins to sub-- well, actually, lease its own submarines out. That's crazy to me.
-That would be.
-But we're not talking about that.
-No no no, thank goodness.
-Thank goodness. We're talking about subleasing, subleasing real estate. And so I'm going to look at the definition, and I'm not going to laugh, because I know you people at home are not laughing.
-Don't go into it.
-This is serious. OK. "A sublease is a lease in which the original tenant, lessee, sublets all or part of the subleased interest to another tenant, known as the subtenant, while still retaining a leasehold interest in the property, also known as a sandwich lease, due to the sandwiching of the original lessee between the lessor"-- wow-- "and the subtenant." The camera guys-- if you guys at home knew the kind of pressure I deal with-- camera guys laughing. They're not taking this serious. Let me read it again here. "Also known as a sandwich lease due to the sandwiching"-- What does this mean?
-Basically, if you lease a space, and maybe now you don't want to use it anymore-- you're ready to move on to a bigger space, but you still have this obligation to the current landlord-- you can lease your space to another tenant. So you have the original landlord, who leased the space to you. Now, you're going to turn around and lease that space to somebody else. And that lease between the original tenant and the subtenant, or the tenant under you, is called a sublease.
-How often do you see this, though? Because you have buildings where you have-- how many square feet does your firm have right now? How much square footage does your firm have right now?
-About four million square feet.
-So your firm is about four million square feet of office space. Do you allow subleasing?
-Yes. So the main lease, the lease between the landlord and the original tenant, will usually have a clause that describes if subleasing is allowed and, if so, what approval rights the landlord has for allowing a sublease.
-Is that your jet?
-It Is. I'm a little late.
-Somebody stole it. OK. Here we go. The question I have here, though, is, honestly, if somebody is subleasing-- let's just break it down to the very basic level. If I'm leasing space from you right now and I'm like, oh crap, I am not going to make this lease payment in four months. And so I call a buddy. Boo boo boo boop. Hey, buddy, you want to lease my space from me? He says, sure. Now, he writes me a check. I write you a check. That's a sublease.
-That's right. And then the original tenant isn't off the hook, usually, for the lease with the landlord. But they have now an income stream from a third party to cover that original lease. One thing it's important for the tenant, when they're negotiating their lease at the outset, is to usually -- is to try to negotiate favorable terms, so that they have rights to sublease on their own.
-What do you know about the leasing of submarines?
-Very little. They usually go under.
-Fzzzzzzz. All right. Well, thrivers, as you know, I never want to end these kind of segments without expressing my appreciation for Michael Burer in a way that's like a verbal bouquet. But sometimes even I almost run out of things to say, because I appreciate you so much, and I'm like, how do I say it? Is there even a language for it?
-And so I-- sometimes delegate it. I brought in a guy. He's six foot eight. True story. He's six foot eight. He has a college degree. And he wrote this for me to read to you. That's how sincere I'm being right now. He says, "Michael, I appreciate your help today so much with the complex issue of subleasing, that I think it's beginning to affect the actions of professional sports players across the universe." To me, that makes no sense. What about for you?