If you are leasing a property as a landlord or property manager, it is important you understand the basic requirements of leases and subleases. Without this knowledge, it is practically impossible to know what to allow and what not to allow in a lease agreement, especially when it comes to subleases. So what are landlords supposed to know about subleasing?

What is Subleasing?

To sublease is when tenants use their current rental conditions to lease to a different tenant. Depending on the terms agreed to in the sublease, the new tenant may be required to pay the entire rental amount, or part of it, and also assume liability. In the event that the sublease agreement dictates that the burden of liability lies with the original leaseholder, then they assume liability in the event that the new tenant breaches the lease agreement, such as damage to the property or rent payment.

Types of Subleases

Subleases can either be short-term or permanent. When it comes to short-term subleases, the tenant is supposed to revert back the property to its original condition upon vacating. The original leaseholder can also enter into a short-term sublease agreement in the event that they will be temporarily absent, such as in the event of medical emergency or work-related commitments. This means that the property will only be available for a new tenant for the same period of time that the original leaseholder will be absent.

Permanent sublease agreements on the other hand are issued when the original leaseholder is moving away permanently and the property requires a new tenant for the remainder of the lease period. This implies that the subtenant becomes the primary tenant - a concept referred to as assigned lease. Assigned lease agreements however cannot be entered into without the landlord’s consent.

There are instances when the sublessee does not have any direct contact with the landlord. In such an event, the subtenant pays rent to the original leaseholder. The original leaseholder is also supposed to address any issues or complaints by the subtenant regarding the property. The original tenant also makes requests, such as repairs to the property, on behalf of the subtenant. 

Sublease Pros for Landlords

One of the main benefits of subleasing for the landlord is that it ensures that there is no vacancy at the property. Due to unavoidable circumstances, a tenant might be forced to cancel a lease agreement midway through, creating a vacancy. If the landlord does not allow for subleasing, such a situation would lead to loss of rental income, as there would be a vacancy at the property.

Another key benefit of subleasing property, such as mobile homes for lease, is that it is the original tenants that are responsible for finding the sub-tenant. By passing this burden to the original leaseholder, the landlord is not required to go through the hassle that comes with finding a new tenant, or even needing to fix up the unit. More importantly, it is assumed that the landlords have their hands full and hence might not have time to find new tenants mid-lease.

Landlords are also likely to gain from a sublease considering that the original tenant is responsible for the sublessee. Since original tenants are the ones in a lease agreement with the landlord, they are held responsible for any of the sub tenant's actions, such as damage to the rental property or when the subtenant fails to pay rent. This eventually translates to less work to the landlord, in terms of property management.

Sublease Cons for Landlords

On the downside, landlords tend to suffer from inconsistent screening procedures, especially if they have their own standards in tenants’ screening. It is not a requirement that all sub-tenants be screened by the landlord, which means that the landlord has no control on who occupies the property. There are leaseholders who are more concerned about finding someone to cover the rent, and they will not hesitate to sublease the property to tenants with a checkered past.

Another issue that landlords are likely to encounter is whereby the original tenant sublets the property to an unreliable sub-tenant. It is the responsibility of the leaseholder to ensure that all communication to the landlord is made in good time as to avoid any direct, or indirect, confrontation with the subtenant - with the possibility of litigation. When dealing with an unreliable subtenant, the landlord faces possible damages to the property and loss of rental income.

Some subtenants, (by virtue that they did not sign the original lease agreement) are tempted to violate the original terms. If you as the landlord has a no-pets policy or a no-noise policy, subtenants are likely to violate such policies as they have no binding agreement with the landlord. Whereas in some states, the original tenant can evict the subtenant, recurrent violations of the lease and sublease agreements allows you to evict both the original and the subtenant.

Sublease Terms in Lease Agreements

One of the best ways of protecting yourself, as the landlord of a property, is to include a rental sublease section to the initial lease agreement. Make sure that your tenant knows what to expect in the event that a situation might necessitate subleasing. Detail all of the information, including the possible length of subleasing, vetting of the subtenants, as well as the expected rental income.

Here are some of the things you should include in the sublease agreement. Start by requiring your tenant not to enter into a sublease agreement without your consent. The original tenant should provide a notice for subletting that should also include; the reasons for subletting the property, the duration of the sublease, tenant information and any other relevant information that helps you make an informed decision on whether to allow the sublease or not.

As the landlord, it is also a good idea to be allowed to vet all subtenants the same way you do any other tenant. This ensures that the screening process is up to your standards, and things such as the checking of the employment status, background checks and credit checks are all conducted properly. You cannot afford to rely on your original tenant to get you this information. The sublease agreement should also have all of the logistics that outline the duration of the sublease, move-out date and deposit status.

Rent collection should also revert to you, and not your tenant. Require that the rent collected from the subtenant is paid to the landlord. There are unethical practices in the real estate leasing world where original tenants demand a higher amount from the subtenant, and only send the initial rent to the landlord while pocketing the difference.

Short-term sublets are also not the best of ideas when subleasing. This is because the original tenant could be advertising the property on sites such as Airbnb that allow property leasing for short periods. To deter such practices, explicitly ban short-term sublets.

Bottom Line

The main question that landlords and property managers have is whether it is a good idea to allow subleasing. As it is always the case in the real estate world, there are both pros and cons to subleasing. Whether or not it is a good idea depends on a myriad of factors, such as the tenant and subtenant you are dealing with, your current situation, and legal issues, that have a direct, or indirect impact, on the agreement.

As mentioned earlier, the best way of handling subleasing is to ensure that there is a policy for such instances in the original lease agreement. This cushions you from possible violations where tenants even enter into subleasing agreements without your knowledge. There is no law that requires you to sublease, therefore only allow the practice under the right conditions and terms that are acceptable to you.