subleasing-guide-for-landlords-and-tenants

Subleasing: A Guide for Landlords and Tenants

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As a landlord, limiting vacancies at your rentals and keeping rent payments flowing are top priorities. But no matter how well you screen potential tenants or how great your place is, tenants may have to move early for one reason or another.

While this can be extremely concerning for a landlord, many tenants don’t want to break their rental agreement. Instead, they may request to sublease the rental, which is a common alternative to breaking a lease that maintains tenancy and ensures rent payments are made as scheduled. In this article, we’ll answer landlords’ questions about subleasing and guide you through successfully subleasing a rental. We’ve also researched common questions renters have about sublease agreements to ensure everyone’s on the same page. Let’s dive in!

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What is a Sublease?

According to Investopedia, “A sublease is the re-renting of property by an existing tenant to a new third party for a portion of the tenant’s existing lease agreement. The sublease agreement may also be called a sublet.” In other words, a  sublease is simply a new rental agreement established between a tenant and a subtenant. Generally, the process is as follows: your original tenant will locate another person to cover the responsibilities of the rental lease (mainly paying monthly rent). The person, known as the subtenant or sublessee, who takes over the lease will then move into the property and pay rent.

Subletting vs. Subleasing

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Is there a difference between subleasing and subletting? Ye and no. Both achieve the same goal of renting out a property to a new tenant. The difference lies in who ends up in charge of the lease. When subletting, the new renter will sign a brand new lease (or sublet agreement) directly with the landlord, while subleasing involves renting the property to a new renter through the original tenant and their associated lease agreement. Subletting places the landlord in charge of collecting rent directly from their new tenant, but when subleasing, the old tenant will be in charge of collecting the new tenant’s rent and distributing it to the landlord. No matter which option you choose, both ensure your rental property occupancy, which means the rent will keep flowing. 

For the purpose of this blog, we’ll use the term subleasing to refer solely to the act of a tenant renting out their rental to a subtenant.

Subleasing Pros and Cons for Landlords

Subleasing comes with its positives and negatives, but thankfully, many of the negatives can be avoided with proper precautions. Before honing in on what landlords can do to protect themselves and their investment, let’s take a look at the pros and cons of subleasing:

subleasing-pros-and-cons-for-landlords

Subleasing Pros for Landlords

  • Subleasing helps you avoid a vacancy: A tenant moving before their lease is up could mean a break in the lease – but not if you allow subleasing. Allowing a tenant to sublease means you don’t endure vacancy for a period of time and lose out on rental income. 
  • It’s the tenant’s responsibility to find the subtenant: With a sublease, the original renter is responsible for finding an appropriate applicant. This limits your involvement, saving you the headache of finding a new tenant.
  • The tenant manages the subtenant: Since the original tenant is on the lease with the landlord and the sublease is between the tenant and the subtenant, the original tenant is responsible for everything from rent payments to property damage — which means less work for you!

Subleasing Cons for Landlords

  • Without proper prep, subleasing can lead to poor screening and an unreliable subtenant: There’s a good chance that your current renter has never screened prospective tenants before, which means they may not follow the screening process you rely on. They may be more concerned with finding someone to cover the rent than they are about the subtenant’s qualifications and background check. It’s a risk to rely on the original tenant to relay rent payments and maintenance issues.
  • There could be more property damage: Whether it’s a lack of communication about maintenance issues or true property damage, a subtenant may feel a lack of responsibility for the property or otherwise be unaware of the original lease agreement rules.
  • There may be lease violations that lead to eviction: Besides not paying rent or causing property damage, the subtenant could violate the original lease in other ways, such as causing noise complaints. This may be cause for you or the original tenant to evict the subtenant.

Protecting Yourself Through a Sublease Clause & Tenant Screening

Though some landlords may prefer for tenants to not sublease their rental, many states’ landlord-tenant laws do not allow landlords to deny tenants the ability to sublease. However, in the case that your tenant does decide to sublease, there are still ways to protect yourself as a landlord.

To start, you can explicitly address subleasing in the original lease agreement. A sublease clause states that the tenant is not allowed to sublease the property without their landlord’s permission, which must be received in writing. This strategy will keep you well informed of your tenant’s intentions. Legally, the sublease clause should also state that you will allow the tenant to sublease your piece of real estate if the terms are reasonable. If and when your tenant approaches you about subleasing, remember – good communication is key to preventing landlord-tenant issues that could affect your rental’s return on investment.

While the responsibility of locating possible subtenants typically falls on the tenant, the landlord should oversee the screening of the applicant. Take the same approach you used to find your original tenant to qualify the subtenant. Set financial criteria, along with background and eviction history criteria, and meet the applicant in person. Based on your findings, you may choose to reject any applicants who may not be a good fit. Make sure to include that you will be screening tenants for credit, criminal, and eviction history in the lease agreement – you can also specify who will pay for the screening fee, whether that’ll be the current tenant, subtenant, or you.

Additionally, you can require the subtenant to have renters insurance (if your tenant’s renters insurance doesn’t cover the subtenant) and ban subtenants from listing their vacancy as a short-term rental on Airbnb or VRBO.  We also recommend you provide a welcome letter template that you or your original tenant can share with the new renter that outlines helpful information, the major clauses outlined in the written lease, how to submit maintenance requests, etc., so they have everything they need to treat your rental property with respect. 

If your tenant subleases without your permission, defer to the way the sublease clause has been written in your lease. You may have the legal right to evict the tenant and the subtenant. In addition, you may also be allowed to sue for any damages that resulted from the illegal sublease agreement. For an overview of the eviction process, visit this link.

When in doubt, check your local laws to avoid any sticky legal situations, but the steps listed above will set you up for success.

For Tenants: How to Sublease Your Rental

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When subleasing, it’s important to understand you assume the position of the middleman between the landlord and subtenant. In a sense, you become a landlord yourself by ensuring your subtenant pays rent, maintains the property by reporting maintenance issues, and of course, follows other provisions in the lease agreement. If this seems like too much responsibility, subleasing may not be the best option for moving out of your rental early, and you may need to consider breaking your lease agreement.

If you feel ready to take on the landlord role, here are a few steps you can follow to successfully sublease your rental:

  1. Let your landlord know your intentions. To maintain a positive relationship with your landlord, let them know you wish to sublease your rental. Having an honest, open discussion will foster trust with your landlord. Plus, if issues arise with the subtenant, it’s best to have your landlord’s support through the process.
  2. Find a good subtenant. Just as the landlord vetted you during the rental application process, you should do the same for a potential subtenant. Many landlords will require tenant screening, but to help speed up the process, you can do your own screening prior to providing the landlord with the applicant’s information. Remember, you want to rent to a subtenant who will pay rent on time and maintain the property to safeguard your security deposit and follow the lease agreement. Don’t be afraid to ask for references from previous landlords to validate their rental history!
  3. Help set up online rent payments. To avoid any disputes or confusion over rent payments, consider setting up online rent payments between the subtenant and your landlord. TurboTenant’s online rent payments make this step simple since your subtenant will be able to pay rent directly to your landlord via ACH and credit or debit card.

Pro Tip:

If you live with co-tenants and only one of you is moving out, they’ll be in charge of finding your new roommate. Advise them to post on social media and sites like Craigslist if they’re having trouble finding a subtenant.

As you can see, subleasing has pros and cons for both landlords and tenants, but with a clear lease agreement, landlords may be able to comfortably allow tenants to sublease their rental. If you’re in need of a customizable lease agreement, you can easily create one with TurboTenant today! 

To guarantee there are little to no issues with a subtenant, both tenant screening and a sublease provision in the original lease agreement will serve as protection regarding who’s ultimately responsible for rent payments, additional lease terms, maintenance issues, and more. Landlords can always opt to sublet, in which, a brand new lease is established with the subtenant. 

No matter which path best suits your unique situation, we hope these tips help make the process smooth and easy!

Subleasing FAQ

What happens if the subtenant does not pay rent?

If the subtenant doesn’t pay rent, then the original tenant is responsible for the monthly rent since they’re serving as the middleman between the subtenant and the landlord. Remind your tenant of this responsibility before they decide to sublease. You can even encourage your tenant to screen the applicant themselves before passing their information on to you for final approval.

What if your tenant wants to use your rental property as an Airbnb?

Airbnb and VRBO are similar to subleases since they’re generally both short-term rentals. In the same way your tenant would ask for permission to sublease, they need to ask for your permission prior to renting out the property on any short-term rental site. If you prefer for your tenant not to use Airbnb or other sites, add a clause to the lease agreement stating that you ban this type of short-term rental.

Are you legally required to allow your tenant to sublease your rental?

While state laws vary, most states do not allow landlords to deny their tenants the ability to sublease a rental. However, you can still require the tenant to get written permission from you to sublease. Suppose the tenant was to illegally sublease the property. In that case, they’ll violate the original lease terms, which jeopardizes the tenant’s right to return to the property and gives you grounds to move forward with an eviction of both the original tenant and subtenant.

Who needs to sign a sublease agreement?

A sublease agreement will need to be signed by the landlord, the original tenant, and the subtenant.

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