Legal Definitions - underlease

An underlease is a type of lease agreement where a lessee (the original tenant) leases some or all of the leased property to a third party for a shorter term than their own lease. The lessee retains a reversion in the lease, meaning they still have some rights to the property. This is also known as a sublease.

• John leases an apartment from the landlord for a year. After six months, he decides to move out but still has six months left on his lease. He finds a friend, Sarah, who agrees to rent the apartment from him for the remaining six months. John is now the sublessor and Sarah is the sublessee.
• ABC Company leases a warehouse from the landlord for five years. After two years, they realize they don't need the entire space and decide to sublease a portion of it to another company, XYZ Inc., for the remaining three years. ABC Company is now the sublessor and XYZ Inc. is the sublessee.

These examples illustrate how a lessee can lease some or all of their leased property to a third party for a shorter term. The original lessee still has some rights to the property, but the sublessee also has certain rights as outlined in the sublease agreement.