Legal Definitions - sandwich lease

A sandwich lease describes a specific leasing arrangement where an existing tenant, who holds a lease directly from the property owner (the original landlord), then subleases the property or a portion of it to another party (the subtenant). In this scenario, the original tenant acts as a middleman: they are both a tenant to the original landlord and, simultaneously, a landlord to the subtenant. This creates a "sandwich" effect, with the original tenant positioned between the property owner and the end-user subtenant.

Here are a few examples to illustrate this concept:

• Example 1: Office Space Sublease

  Imagine "InnovateTech Solutions" signed a five-year lease for an entire floor of an office building. After two years, due to a shift to remote work, they found themselves with more space than needed. To reduce their overhead, InnovateTech Solutions decides to sublease a section of their floor to a smaller startup, "Pixel Design Studio."

  In this situation, the building owner is the original landlord. InnovateTech Solutions is the original tenant, but they also become the landlord to Pixel Design Studio. Pixel Design Studio is the subtenant. InnovateTech Solutions is in the "sandwich" position, responsible for paying the full rent to the building owner while collecting rent from Pixel Design Studio for the subleased portion.

• Example 2: Residential Relocation

  Consider Maria, who signed a two-year lease for a two-bedroom apartment. Six months into her lease, she receives an unexpected opportunity to work abroad for a year. Instead of breaking her lease and incurring penalties, Maria finds a friend, David, who needs a place to live for exactly that year. Maria then enters into a sublease agreement with David for her apartment.

  Here, the apartment building owner is the original landlord. Maria is the original tenant, but she also acts as the landlord to David. David is the subtenant. Maria holds the "sandwich" position, maintaining her obligations to the building owner under the original lease while also managing David's tenancy as his landlord.

• Example 3: Commercial Retail Downsizing

  "Gourmet Grocer" leased a large storefront in a bustling shopping center for a ten-year term. Five years into their lease, they decide to streamline their operations and focus on online sales, requiring less physical space. They find a small, independent bakery, "Sweet Delights," interested in leasing the front half of their existing store. Gourmet Grocer then executes a sublease agreement with Sweet Delights for that specific area.

  The shopping center's management company is the original landlord. Gourmet Grocer is the original tenant, and it also assumes the role of landlord to Sweet Delights. Sweet Delights is the subtenant. Gourmet Grocer is in the "sandwich" position, obligated to the shopping center for the entire original lease, while simultaneously managing the sublease relationship with Sweet Delights.