In simple words subletting means creating a rental agreement / lease agreement, where the tenant rents out all or part of the building to another individual for a particular period. In most cases it is a part of the rented premises and not the entire premises. Renting out the entire space could result in breaching of the lease agreement. The individual to whom the property is rented out is a subtenant.
Subletting can be worked out in two ways
1. The Tenant becomes the Landlord to the subtenant. In such a case – the original tenant is a tenant to the Landlord and has to abide by the rules of the lease agreement. He is a landlord to the subtenant and has to follow the sublease with the subtenant. In such a case, the original tenant is liable for all the actions of the subtenant. In this case the Landlord expects you to pay the rent though you are renting out the property with his permission.
2. The Tenant becomes a cotenant along with the subtenant. In such as case, the original tenant and the subtenant are jointly responsible and in lease with the Landlord
As a Tenant, in most occasions, subletting is done
The First and Foremost thing to be done before subletting the property is to check with the Rental Agreement / Lease Agreement for the subletting terms and conditions. If it is not mentioned or permitted as per the agreement, then you have to get a written permission explicitly from your Landlord (better in writing) before you sublet the property to avoid conflicts and legal issues. In such a case, the Landlord may charge a fees or additional rent for subletting the property.
Sublease is a lease agreement between the tenant (who already has a lease with the Landlord) and the new occupant who will take a part of the building or whole of it for a particular period. The Landlord is generally not a part of the sublease. The sublease claims that the original tenant decides to let someone else share and stay in the property with the permission of the Landlord. On the other hand, as an owner of the Property, the Landlord, having more rights can refuse to sublet.
Sublease can be for a long term or short term. The sublease does not affect the lease between the Tenant and the Landlord but the original lease is incorporated by reference in the sublease. Similarly a sublease cannot overrule the restrictions contained in the original lease. For instance, if the sublease is for a restaurant and if original lease has a restriction for commercial or retail, then the sublease cannot be allowed.
Though subletting could be an ideal (practical) choice for making use of the unused space in the rented house and also generate additional income, you need to evaluate the pros and cons of the decision.
Advantages of Subletting
- Space Utilisation – If you have a space that is unused, subletting results in maximum utilisation of the vacant space.
- If you are not staying in your house and paying the rent, then you feel that money is being wasted. When you sublet – you are sharing the rent thereby saving money.
- If you are frequently travelling and will be away from your property regularly, then you have someone to take care of the property in your absence.
- Helps to ensure that the Landlord gets the rental payments due to flexibility of financial burden and sharing of the maintenance tasks.
- You do not break the lease when you sublet the property and gives you flexibility.
- Subtenants can become primary tenants at a later date if required.
Disadvantages of Subletting
- Tenant Finding is the most important factor in subletting. You have to make a thorough background check of the individual before subletting else it could pose a serious risk to both the tenant and the Landlord and you can end up with many obstacles.
- If the subtenant is unreliable, you could end up spoiling your reputation with the Land Lord. Since your reputation is at stake, you can use the services of Rental Assistance Service Providers or Property Management Service providers to find a tenant or do the background check.
- If the subtenant damages or skips the rent, then you will end up paying for the same because the Landlord is not a part of the sublease.
- The Landlord must rely on the primary tenant to ensure the original terms and conditions of the lease are followed by the sub tenant.
- If there is a conflict with the subtenant then you will run into various obstacles. You will be responsible to the terms and conditions as per the original lease agreement with the Landlord.
Keys Factors to consider for Sublease Agreements
- It is important to determine the security deposit (along with the rent) when subleasing the property to cover the damages and unpaid rent (if any in future).
- The Sublease should mention the rent and the payee details to be clearly mentioned – whether it is to be paid to the Tenant or to the Landlord.
- The Sublease should specify the period of the sublease and the renewal terms and conditions.
- The sublease contract should clearly mention the property extent that the subtenant will use and control including the utilization of the amenities and common areas including the parking sharing.
- The condition of the property is to be mentioned and any improvements to be done by the sub tenant should be mentioned.
- The sublease is to mention the purpose for which the property is to be used and the duration of the same.
- There should be a plan for the payment of the common bills and the utility bills.
- The Sublease should mention the utilization of the premises and the amenities provided to the subtenant
Now that you have got a fair idea of the subletting, subleasing the important point is that you have to screen the subtenant and make sure he is reliable else it could cause more problems than solving the problems. The worst thing that can happen is having a tenant who is unreliable and breaches the sublease. You are ultimately legally responsible with the Landlord.