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How Does a Sublease Work?

How Does a Sublease Work?How Does a Sublease Work?

Summary

If your tenant decides to take on a roommate after the start of the lease or leave before the lease is up, they may choose to sublease their share of the property to someone else. The problem? That leaves you with no control over who's occupying your property. Learn about a better option and find out how to keep the lines of communication open so that your renter reaches out to you first and keeps you in the loop.

If there’s one thing you can count on, it’s the unexpected. From job loss to job change, divorce to marriage to parenthood and everything in between, tenants, and their landlords, frequently have to cope with changes that affect budget, location, and circumstances. 

In fact, such unexpected changes can put a bite on the wallet, with sudden relocations adding up to thousands of dollars in many cases both for tenants, who have to fund their move, and for landlords who may be left with months of unexpected carrying costs. 

Even more cost comes in when a tenant has to move quickly, often having to break their lease and suffer financial penalties as a result. In order to avoid this, some tenants may take matters into their own hands, installing a sub-tenant and subleasing the property where they’re currently living.

What is a sublease?

A sublease is an agreement between the primary tenant on the lease and a secondary tenant or sub-tenant. The sub-tenant pays the tenant their rent every month and the tenant is responsible for paying the rent to the landlord in turn. 

Some states and municipalities allow landlords to refuse subleases completely. On the other hand, some landlords welcome subleases as an option that keeps their rental unit occupied, even when life changes might otherwise result in a temporary vacancy.

When might a sublease become necessary?

A sublease can become necessary in the event that 

  • A tenant experiences a job change that requires them to relocate
  • A tenant loses their job and can no longer afford the rent payment
  • A tenant marries or moves in with a significant other
  • A pair of married tenants get divorced and neither can afford the rent on their own
  • A pair of roommates find that they can no longer live together
  • A tenant decides to take in a roommate who was not an original tenant on the lease

Of course, there are any number of other scenarios where a tenant might no longer be able to occupy or pay for the property, even while they are within the lease term.

When is subletting a better option?

The problem with a sublease for the landlord is that it puts a middle person — the primary tenant — as go-between for the landlord and the sub-tenant who is paying the rent. The landlord’s screening process and lease agreement are with the primary tenant, not the sub-tenant. That can leave the landlord holding the bag if the sub-tenant does not pay the rent, damages the property, or abandons it altogether.

The problem with a sublease for the primary tenant is that it puts them in the position of being responsible should the sub-tenant turn out to be unsuitable. In addition, it keeps them on the hook for on-time rent payment each month, which may not be possible if the sub-tenant doesn’t pay them on time.

The problem with a sublease for the sub-tenant is that it leaves them with no official position. Even if they pay on time and the primary tenant decides to pocket the money, they may find themselves evicted. In addition, at the end of the lease term, the sub-tenant will have no option to renew their lease since their agreement is with the tenant, not the landlord.

For all of these reasons, a sublet is a better option, allowing the secondary tenant to deal directly with the landlord and ensuring a more transparent, secure approach to their tenancy.

In order to sublet, the primary tenant would approach the landlord and explain their need to vacate the property or to bring in another tenant as a roommate. The landlord could then either terminate the original lease and lease directly to the new tenant, allow the new tenant to sublet the property directly, along with the primary tenant, for the remainder of the original lease term, or allow the new tenant to sublet the property directly in lieu of the primary tenant for the remainder of the original lease term.

At the end of the lease term, if the sub-tenant has proven satisfactory, the landlord may choose to lease to them directly, entering into a new lease agreement and allowing them to continue occupying the property as the primary tenant.

Adding a sublease or sublet clause to your lease agreement

It is a good idea to spell out exactly how a sublease or sublet would work within the lease agreement for the primary tenant. That will help you keep the lines of communication open and help you to ensure that your tenant will reach out if there is a change in their circumstances, giving you the ability to move forward together to find a solution.

In the sublease or sublet clause, you have the options to do any of the following:

  • Forbid sublets completely (check the applicable laws in your state and municipality to find out if this is an option)
  • Allow sublets, with tenant screening and written permission from the landlord
  • Allow limited sublets depending upon specific circumstances
  • Allow sublets without limitation

It is a good idea to talk to your real estate attorney and insurance company to find out if a sublet or sublease would affect your legal liability, the terms of your lease agreement, or your insurance coverage or cost.

RentSpree offers the tools you need to create a streamlined lease process, from initial application and documentation through rental payments and processes. You can even upload your custom lease agreement for easy and convenient review and electronic signature capture. With everything you need in one place, RentSpree offers landlords, rental agents, property managers, and tenants exceptional peace of mind and convenience.

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