Subleasing: Understanding the Pros and Cons for Landlords
Should I let my tenants sublet my rental home? If you’re considering allowing your tenants to sublease your property, read on to learn the pros and cons of subleasing for landlords.
As a landlord, finding tenants that you trust poses a significant challenge. Especially when your property’s location and the current state of the rental market get factored in.
From background and credit checks to a meet-and-greet, these steps comprise crucial building blocks in the landlord-tenant relationship. And none of them should be taken lightly.
Once you’ve found a person who’s reliable and keeps up your property, you want to prolong the relationship. But life has a way of throwing the unexpected into the mix.
For example, what if your favorite tenant brings up the touchy topic of subleasing?
Before you start panicking and emphasizing the dates on the rental agreement that they signed, you need a thorough understanding of how the concept works.
Continue reading to find out more about the pros and cons of subleasing and whether or not it makes sense for you.
What Is Subletting?
From a legal standpoint, a sublease contract transfers an original lease from your current tenant to a third party or subtenant.
With the signing of a sublease, this subtenant takes on sole responsibility for upholding the requirements of the original agreement. This includes all obligations, perks, and rent payments associated with the property.
But this doesn’t necessarily signal the end of your relationship with your original tenant. In many cases, the original tenant accepts payments from the renter of the sublet apartment and then passes this money along to you.
Many sublease agreements also prove temporary with the original tenant returning after an agreed-upon date.
Cover Your Back Legally
At this point, you may be wondering what legal recourse you have should the topic of subleasing come up. Or, you may even be in the unenviable situation of having a tenant decide to sublease your property without your permission.
What rights do you have as a landlord in these cases?
Hopefully, your rental agreement includes a clause addressing subleasing. If not, you need to add one to future agreements.
When it comes to the message of the clause, you’ve got options. You can either forbid subleasing of any kind. (You’ll need to check the laws in your state and city to make sure banning subleases is allowed.)
Or, you can include wording that states subleasing is prohibited without your permission or knowledge.
We suggest adding wording that makes it clear your tenant cannot sublease without written permission from you. That way, you can avoid messy misunderstandings down the road. With landlord-tenant law, always err on the side of clarity.
We’ve answered the question, “What is a sublease?” Now, let’s explore the pros and cons further so that you feel confident about your ultimate decision.
Pro #1: An Instant New Tenant
When a tenant comes to you asking to sublet your property, it’s typically because a major life event has necessitated a sudden move. This could include any number of things including a divorce or breakup, a military demand, or a job move.
Your tenant fears paying a penalty for breaking their lease. And they can save you serious legwork by finding a replacement, especially if you’re a long-distance landlord.
It’s a win-win, right?
Not exactly. Since your tenant needs to make a quick exit, they might recommend the first person who comes along. This can lead to serious consequences.
Con #1: The Subtenant of Your Nightmares
Okay, maybe subleasing means you don’t have to place ads and go on a frantic search for a replacement for your original tenant. But don’t let that lull you into accepting anybody they suggest.
Your idea of an excellent subtenant may not match that of your current renter. So, don’t forgo background checks, credit checks, and all the rest of it. In other words, show a potential subtenant the same scrutiny you did your original tenant.
Pro #2: Uninterrupted Cashflow
Two different types of sublease agreements exist, short- and long-term. In short-term subleases, the original tenant has to go away for a limited time and finds someone to “hold their spot.”
With a long-term lease, the original tenant is looking for a permanent replacement. Either of these scenarios works well for you from a monetary standpoint. Without any vacancy, you maintain the same cashflow as before.
Con #2: Unforeseen Expenses
Again, this con comes back to how well you screen your subtenant. If you don’t put enough care into vetting them, you could end with a whole lotta property damage and nobody to pay for it.
Don’t get left holding the bag because your original tenant suggested an unsuitable person. That said, the flip-side is that your original tenant might abandon the property in bad condition if you don’t try to work with them.
Besides actual damages, the most common complaint landlords receive about temporary inhabitants are related to noise issues. The last thing you want to do is alienate your neighbors or other tenants. This could lead to lost revenues, too.
Pro #3: Legal Protections Exist
Fortunately, the right legal paperwork represents a failsafe to protect you and your property should a less-than-satisfactory subtenant take over. Always make sure that your original renter executes a sublease agreement with the new tenant.
That way, you’ll have clear legal recourse should anything go sour. A standard sublease agreement form should be filled out by all parties involved.
This form allows you to go after the original tenant for any damages or loss of revenue incurred due to the actions or negligence of a subtenant.
Con #3: Scams Exist, Too
There have been instances where original tenants decided to sublet a landlord’s property and charge 10 percent off the top. Then, they pocketed these profits.
Don’t let this happen to you.
Instead, make sure that all of your lease agreements and sublease agreements have language stipulating the rent to be paid. There should also be wording to clarify that any extra rent paid should revert to the landlord.
The Dos and Don’ts of Subleasing
Now that we’ve gone over the basics of subleasing and examined the main pros and cons, you should feel more confident making a final decision.
The best reason to consider subletting? If you have a tenant that you’d like to continue a long-term relationship with but who must be gone temporarily. Under these circumstances, it may be worth the risk.
Looking for more tips on the landlord-tenant relationship? Read on for our ultimate checklist for landlords with tenants moving out.