29.3 B. Is The EXIsting Package Of Rights Under The Direct Lease Acceptable To The Subtenant?

• Jurisdiction: New York

B. Is the Existing Package of Rights Under the Direct Lease Acceptable to the Subtenant?

Once the subtenant’s counsel has determined that the sublease transaction will work, counsel must review the direct lease to make sure that its terms are acceptable.⁸⁷⁸ Obviously, the terms of the direct lease must be consistent with those of the proposed sublease transaction; i.e., allow the use contemplated under the sublease, cover at least the space proposed to be sublet, and have a term at least as long as the sublease term. All other terms of the direct lease must be tolerable for the subtenant. Common problem areas involve alterations, services, and other landlord covenants. In some cases, counsel may be pleased to find that the tenant’s transferable rights exceed the rights that the subtenant reasonably could have negotiated for in a sublease. This can be true if the tenant is extremely creditworthy and has leased a large block of space or if the tenant signed a lease when landlords were hungrier for tenants. Even in such instances the tenant as sublandlord may not want to pass along all of the benefits and rights it has under the direct lease to the subtenant.⁸⁷⁹

If a provision in the direct lease is not acceptable, the parties to a sublease must address the issue in the subleasing transaction. In some situations, the parties can only solve problems by going back to the landlord to modify the landlord’s rights and obligations. Often the landlord will...