Your tenant signed a lease until the end of the year, but suddenly, they plan to leave the area before then. What happens next? If you have a responsible tenant, they’ll let you know and work with you to figure out a solution that benefits both you and them. However, some tenants may not inform you that they are leaving and readily hand over the keys and financial responsibilities to someone new. This can land you in some hot water. Since you are a landlord that does not reside on the premises, it is important to review the lease agreement with your tenant in its entirety, especially concerning the act of subletting.
Subletting is having someone else take over the responsibilities of the existing lease to a rental property. Essentially, the new or sub-tenant pays the remaining rental expenses while the original tenants have left the dwelling. The terms of the sublet may be that the sub-tenant will pay a portion of the rent and the original tenant will pay the remainder. In other agreements, the sub-tenant will take over the obligations for the lease. Whatever the circumstances, it is important to discuss if this should be included in your lease agreement.
What Circumstances Can a Tenant Sublet?
You must pay close attention to your lease and have everything in writing. The only times a tenant is able to sublet is if:
- Your lease allows subletting which says a tenant can legally substitute another occupant for himself.
- Nothing is expressed in the lease about subletting.
The only circumstance a renter is not allowed to sublet is if you, the landlord, have explicitly forbidden subletting. In this case the original tenant is not permitted to do so unless they have made special arrangements with you including written consent and processing fees.
What Are the Different Types of Sublet Agreements?
Normally, there are two types of sublet agreements, which are Sublease and Assignment:
- Sublease: In this scenario, the original tenant becomes a landlord to the sub-tenant. The sub-tenant pays the rent to the original tenant who then forwards it to the landlord. This original tenant is still held responsible to the landlord if the sub-tenant breaches the lease.
- Assignment: In this scenario, the sub-tenant directly deals with and pays the rent to you, the landlord. However, if the sub-tenant refuses to pay the rent or suddenly leaves, the landlord has the opportunity to sue both the original tenant and the sub-tenant for damages.
As a Landlord How Can I Protect Myself?
An absentee landlord needs to openly express whether subletting is approved in their lease or if it is forbidden. Many tenants will sublet behind their landlords back which can ultimately lead to legal implications. One concern that is overlooked is how this will impact residential landlord insurance policies. Some policies may not even apply since the sub-tenant isn’t included in the original lease.
Your landlord insurance helps protect you from many problems that may threaten the property you own and your financial assets. If you own rental property, you can feel at ease with dependable coverage from H&K Insurance. Contact our agents before you hand over the keys to the new tenant. Also, make sure to catch up on Part I of our blog, What Are the Responsibilities of an Absentee Landlord.