A sublease involves the rental of real property by a tenant to a subtenant. A sublease agreement typically arises when the original tenant no longer needs to use leased space or can no longer afford to make the lease payments. This situation is most common for commercial properties, but can arise for residential properties as well.

In a sublease arrangement, the original tenant accounts for the sublease as though it were the original lessor.  Thus, the original tenant continues to account for its ongoing lease payments to the original lessor as though the sublease did not exist.

Related Courses

Accounting for Leases