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Approving the Tenant, Assignee or Subtenant in Todays Subleasing Market

  Sue McConnachie   |     Sep 13, 2021

It is difficult to assess the full impact on the commercial market, created by the Covid-19 interruption. However, it is predictable that there will be substantial increases for subleasing and assignments, particularly in the office market. With the spread of Covid-19, brought the shift to work from home, leading certain departments to operate remotely with productivity success. Tenants are now exploring downsizing current space through assignments and sublets.

With the negative financial impact on many tenants, it is important to ensure that the tenant remains viable when authorizing assignments or sublets. Credit reporting designed for the property management industry is important for the current tenant who will remain responsible under the lease as well as the assignee or sub-tenant. Depending on exactly what the lease stipulates the landlord usually has the authority to approve both assignments and sublets and therefore, also has the control to ensure that all parties, including current tenant, assignee or sub-tenant are capable of satisfying the lease terms.

By using comprehensive credit reporting, you can be sure you are selecting the right tenants, protecting your investment, maximizing return on property and reducing risk.

One of the best ways to do this is to review your tenants thoroughly, to help you identify:

  • The legitimacy of the current tenant, assignee or sub-tenant - is it active and in good standing with Company's Branch and Corporate Tax Branch?
  • Whether the current tenant, assignee or sub-tenant have the financial stability to maintain the lease
  • Current banking relationships and deposits
  • Current borrowing facilities and balances
  • Legal actions, collection claims, delinquent payments, and tax liens
  • Whether they will suit the reputation of your building
  • If you need to request personal guarantees, letters of credit and security deposits

In any of these situations, choosing the right tenant will:

  • Protect your investment
  • Increase cash flow
  • Improve property value
  • Minimize risk of income loss due to frequent turnover
  • Decrease the risk of damage, fraud, or theft
  • Drive down number of rent concessions
  • Minimize lease modifications/terminations
  • Reduce further subleases and assignments
  • Decline the number of defaults, evictions and midnight moves
  • Reduce exposure to legal claims by or against delinquent tenants

Ultimately, effective tenant screening ensures that your investment is as lucrative as possible and that your financial non-monetary resources are being used effectively. Instead of using your resources to settle disputes or prepare your property for new tenants, you can reinvest in your company and continue to grow.

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By Sue McConnachie

Quality Credit Reporting is North America’s premiere credit reporting agency, committed to providing unparalleled, high-quality reports and services.

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