Playbook: Subleasing, Assignments, and Early Exit Strategies

Why This Matters

Most commercial lease content focuses on signing and renewing. Very little helps tenants when the business changes mid-lease and the space no longer fits.

Post-COVID, this is no longer an edge case. Businesses downsize, relocate, merge, shut down locations, or shift to hybrid work far more often than they expected when they signed. A lease that once felt manageable can quickly become one of the largest financial drags on the business.

This playbook focuses on financial recovery, not just legal mechanics. The goal is to help tenants reduce burn, recover sunk costs, and exit space without triggering default or long-term liability.

Step 1: Understand Your Exit Paths

Before negotiating anything, you need clarity on what the lease actually allows.

Assignment

An assignment transfers your entire lease to a new tenant.

What it means in practice:

• The assignee steps into your shoes
• Rent and obligations remain the same
• You often remain secondarily liable

Best used when:

• You are exiting the space entirely
• The market supports a full replacement tenant
• The landlord prefers a clean transition

Tenant upside:

• Full rent obligation may shift to the assignee
• Simplifies operations and accounting

Key risk:

• Assignments can provide a true cutoff, but only if the lease or consent explicitly releases the tenant. Without that language, a liability tail often survives the assignment

Sublease

A sublease transfers part of the space or part of the term to another occupant.

What it means in practice:

• You remain the prime tenant
• You collect rent from the subtenant
• You still pay the landlord directly

Best used when:

• You need to reduce footprint or overhead
• The space is divisible
• The market will not support a full assignment

Tenant upside:

• Immediate cash flow relief
• Retains long-term control of the lease

Key risk:

• You are still fully liable if the subtenant defaults
• Sublease market rates are typically 50-80% of prime lease rates; reducing clawback opportunity

Early Termination

An early termination is a negotiated exit directly with the landlord.

What it means in practice:

• Lease ends before expiration
• Typically requires a termination fee
• Often includes conditions or releases

Best used when:

• Timing matters more than cost
• The landlord has re-leasing momentum

Tenant upside:

• Clean break
• Removes long-term liability

Key risk:

• Upfront cash requirement can be significant

Step 2: Landlord Consent and Control Points

Almost every lease requires landlord consent for assignments and subleases.

Common consent standards:

• “Not unreasonably withheld”
• “Sole and absolute discretion”
• Silent but implied approval required

What landlords typically review:

• Creditworthiness of the new occupant
• Use compatibility with the building
• Term alignment with the prime lease
• Market rent implications

Reality check:
Even with “reasonable consent” language, landlords often control timing. Expect delays of 30 to 90 days unless the lease imposes a response deadline.

Financial impact:
Every week of delay is unrecovered rent. Consent mechanics directly affect your cash burn.

Step 3: Fees, Conditions, and Timelines

Landlords rarely approve transfers for free.

Typical landlord charges:

• Review or legal fees
• Consent fees
• Recapture rights
• Rent reset provisions

Common timelines:

• Marketing phase: 30 to 90 days
• Consent review: 15 to 45 days
• Documentation and execution: 30 to 45 days

Hidden cost:
Time is often more expensive than fees. A slow approval process can erase the economics of a sublease entirely.

Step 4: Negotiation Tactics That Improve Financial Recovery

This is not a legal exercise. It is a cash flow negotiation.

Tactic 1: Position the Exit as Risk Reduction

Landlords care about certainty.

Frame your request around:

• Avoiding vacancy later
• Preventing default risk now
• Preserving building momentum

A cooperative exit often looks better than a struggling tenant hanging on.

Tactic 2: Offer Value, Not Just Concessions

Examples:

• Short-term rent buyout to bridge re-leasing
• Turnkey improvements left in place
• Early surrender of space for landlord marketing

Landlords respond better to structured solutions than hardship narratives.

Tactic 3: Use Market Reality as Leverage

If:

• Rents have softened
• Vacancy has increased
• Comparable subleases are trading below face rent

Then the landlord’s alternative may be worse than your proposal.

Step 5: Example Clauses to Look For or Negotiate

These clauses materially affect recovery outcomes.

Assignment release language:
“Tenant shall be released from future liability following assignment after twelve months of assignee performance.”

Sublease profit retention:
“Tenant may retain all sublease proceeds without sharing excess rent with Landlord.”

Termination fee cap:
“Termination fee shall not exceed six months of gross rent and operating expenses.”

Consent timeline:
“Landlord shall approve or deny within twenty business days.”

Each of these clauses directly impacts cash preservation.

Step 6: Simple Financial Recovery Framework

Before choosing a path, model it.

Compare:

• Remaining rent obligation
• Expected sublease income
• Termination fee
• Timing of relief

Rule of thumb:
The cheapest option on paper is not always the best if it delays certainty or extends liability.

Key Takeaways

• Exiting a lease is a financial strategy, not a failure
• Assignments, subleases, and terminations each carry different risk profiles
• Landlord consent and timing drive real costs
• Liability tails matter more than most tenants expect
• The goal is recovery and certainty, not just permission to leave