Sublet

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What Does it Mean to Sublet?

A sublet, sometimes called a sublease, is when a landlord is re-renting property from the main tenant to a new tenant. The new tenant takes over the main tenant’s lease agreement under a sublet or sublease agreement. A sublet does not cause the tenant to incur penalties. The landlord continues to receive steady rental payments.

This web page also defines sublet.

How Subletting Works

Subletting a property terminates the original lease and absolves the primary tenant of further financial or legal obligations. The sublet creates an entirely new contractual relationship between the landlord and their new tenant. A sublet can occur for various reasons but usually due to the early termination of the original rental agreement.

Example of Subletting

Below, we’ve created a hypothetical scenario involving a college student in New Mexico who approaches their landlord about subletting their apartment. The student has another tenant in mind, but the landlord isn’t sure she is comfortable with the idea. However, she does weigh out all of her options before giving the main tenant a response.

Let’s see how things play out:

  • Andres Marquez is a geology student at the University of New Mexico
  • He lives off-campus at an apartment complex that is close to the school
  • Andres originally planned on taking extra classes over the summer
  • He also believed that when he signed his original, one-year lease agreement
  • Andres’ perspective changed over the school year
  • He ended up accepting an internship in California for the summer
  • He really can’t afford to pay penalties for canceling his lease
  • Andres approaches his landlord, Myra Blue, about a sublet
  • They never addressed the possibility of a sublet in the original lease
  • Myra owns several small units around town but always avoided sublets
  • Andres is a good kid who pays his rent on time and hasn’t caused damage
  • Myra meets with her real estate lawyers
  • She decides to let Andres sublet his unit based on their advice
  • Andres already has a new tenant in mind: his best friend, Derrick
  • Derrick meets with Myra, and she thinks he would make a suitable tenant
  • Myra wants to draft a sublet agreement with her attorneys
  • She wants to keep things as simple as possible throughout this transaction
  • Myra has her lawyers prepare the new sublease as an addendum to lease
  • The addendum has the same effect as a sublet but requires less re-drafting
  • Andres goes off to his internship, Derrick gets a new apartment, and Myra continues seeing rental payments

As you can see from this scenario, some outcomes are more ideal than others. However, in this case, it worked out perfectly for everyone involved since they had already established trust with each other.

Unfortunately, not all subletting scenarios play out as we would hope. You should always get legal advice, like Myra, before entering into or drafting any contract. Even if you implicitly trust the primary and new tenant, relationships can sour quickly when the rules aren’t clear.

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Sublet vs. Rent

Sublets are when a new tenant takes over the term of a lease from an original tenant. In contrast, rent is when you create an entirely new rental lease agreement. Renting entails some responsibilities, whereas subletting is more convenient for tenants who move frequently.

Here are four other considerations to make when looking at sublet vs. rent:

  • Finances. Renting incurs a short-term deposit and a long-term financial commitment. A new lease is expensive, from damage deposits to the first and last month’s rent. Subletting costs significantly less, and the new subtenant pays monthly rent.
  • Liability. Even if a subtenant fails to make rent on time, the primary tenant remains liable for rent payments. Additionally, the primary tenant is fully responsible for damages in some states. The primary tenant may allow roommates in the sublet agreement to limit liability.
  • Agreements. The main tenant enters into a rental agreement with the landlord. A rental contract should detail the lease terms, including duration, rent amount, restrictions, and breach of contract penalties. A sublease agreement is between the primary tenant or landlord and a subtenant.
  • Restrictions. The main tenant may not create an assignment of the lease on a rental agreement if it expressly prohibits one. Typically, landlords restrict them because they want to know who is residing in their unit and hold the right to evict tenants for unauthorized subletting. However, some state laws allow for sublets, so you may want to discuss them with your attorney before finalizing your agreements.

Is Subletting Legal?

Yes, subletting is legal.

There are currently 17 states with specific subletting laws and 33 with none. However, most states with sublet laws require the tenant to obtain the landlord’s permission.

States that don’t require landlord permission include:

  • Nebraska (unless expressly prohibited)
  • Nevada
  • New York (when landlord owns 4+ units)
  • South Dakota
  • Utah

Landlords and tenants should read up on their state’s subletting laws (where available) before using them as a remedy. Any conditions on or prohibition of sublets should be addressed in the original lease agreement. Doing so will avoid confusion and disputes since both parties are clear on the terms.

What Are Reasons You May Sublet?

The primary reason to sublet is when the tenant needs to end the original lease agreement early. Although, your basis for subletting will depend on whether you’re the landlord or tenant. Main tenants benefit from getting out of their rental payments. At the same time, landlords may want to sublet for rent payment continuity and simplicity.

Several life changes can require the primary tenant to leave their unit early, such as:

  1. Accepting a job in another state
  2. The financial strain of a new child
  3. Studying abroad in college
  4. Taking on seasonal work
  5. Buying a new home
  6. Can no longer afford the unit
  7. Landlord-tenant conflicts
  8. Not getting along with a roommate
  9. Not wanting to live in the unit anymore
  10. Graduating from school early
  11. Taking on an internship
  12. Roommates unexpectedly leaving the unit
  13. Starting a new business

Regardless of the tenant’s reason, landlords should discuss the pros and cons of subletting with real estate lawyers if they have not taken a stance. Today’s globalized and connected world could push the market to accept subletting units. However, subletting is not suitable for every landlord, and legal advice can help you consider the impact it can have on your situation.

Subletting Agreements

Subletting agreements detail the terms of a sublet. They are typically used in residential real estate on apartments, buildings, rooms, and basements. However, you can also use a sublet agreement in commercial lease transactions, including inventory, equipment, and real estate rentals.

While drafting a sublet agreement, both parties should discuss and negotiate specific terms, such as rent, deposits, advance payment, duration, and use. If you have commercial tenants, you may consider other lease options. These options include a triple net lease or a net lease that provides significant benefits to both the landlord and tenant. Again, your real estate lawyers can look at your situation from the big picture and provide helpful recommendations.

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