How much can I raise the rent on a commercial sublease?

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Question:

I sublease a portion of my commercial building. I have not raised the rent for five years. The sublease has been on a month-to-month basis for four years. I now feel it is time to raise the rent. If I present the tenant with a new sublease 30 days in advance of the start date, is there any limit on the amount I can raise the rent -- or on whether I can raise it at all?

Answer:

You do not come across as an ogre; increasing the rent some after five long years seems to be a reasonable move. But first check your own lease to make sure that your landlord didn't specify that any subleasing by you could not be for an amount higher than the rent you pay (or would pay for that portion of the space you're subleasing). This type of clause prevents you from making a profit by subleasing, and it will constrain you when you decide on the new, higher rent to charge your subtenant.

When dealing with a month-to-month tenant in commercial space, most states let you raise the rent by giving one month's advance notice (but check to see whether your sublease provides otherwise). Your gamble is that this particular month-to-month tenant may not like the increase and decide to move out.

Perhaps you can soften the potential blow by discussing the planned increase with the tenant in advance, rather than delivering the news in the cold-blooded language of the lease.

That said, there is no legal limit on the amount of increase you can demand. The limit is the marketplace -- and the thickness of your tenant's wallet.

To learn more, see Nolo's section on Business Spaces & Commercial Leases.

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