January 22, 2023

Upsides and Downsides of Letting Tenants to Sublease

As a landlord, you have the right to define the line between what your tenant can or cannot do in the lease. For instance, a tenant may ask you if he will be allowed to sublease to a third party. In this matter, you can allow or prohibit subletting based on the circumstances or advantages you can get from it. 

For you to decide on it, better check out these pros and cons of allowing your tenant to sublease. 

What is Subleasing?

If a tenant rents out a part or all of the leased property unit to a third party, it’s what you call subleasing. The tenant may charge a portion or the whole or above the original rent price to the subtenant, and the former may transfer all liability to the latter. 

A sublease that doesn't transfer liability to the subtenant can be risky to the original tenant. If the subtenant fails to pay rent, damages the rental property, or otherwise breaches the contract, the original tenant will be responsible for it. 

Rent control may influence your capacity to sublease and how much you can charge a subtenant. The location and type of property are also factors that can affect subleasing. For example, you’re not allowed to sublease if you’re a tenant in Section 8 housing. 

Two Types of Subleases

You have to be familiar with the two types of subleases: short-term sublease and permanent sublease. 

Short-Term Sublease

An example of a short-term sublease is when a tenant is leasing the unit to another temporarily because he will be out of town for a job assignment. The term of the sublease will end when the original tenant returns to the rental unit. 

Permanent Sublease

As its name suggests, this type of sublease usually happens when the original tenant no longer wants to live in the rental unit but subleases it to a third-party person for the remainder of the lease. 

As long as the subtenant pays rent to the original tenant, he will remain a subtenant. The subtenant won’t have to directly contact the landlord, and he will submit his complaints and requests to the primary tenant, who will talk to the landlord regarding what the subtenant wants. 

The sublease agreement becomes an assigned lease if the subtenant acts as the new primary tenant and deals directly with the landlord. 

Pros and Cons of Subleasing for Landlords

Subleasing can provide benefits and risks to the landlord. It’s crucial to assess the pros and cons before you allow tenants to sublease. 

Advantages for Landlords

  • No Vacancy. Instead of finding a new tenant when a tenant moves out of the rental unit, the landlord still receives monthly rent if he allows subleasing. In this case, there will be no vacancy in the rental unit. Vacancy means the landlord will lose rental income and has to spend money to look for a new tenant. 
  • The Landlord May Not Be Responsible for the Subtenant. This situation depends on the sublease agreement, but typically the landlord won’t be responsible to the subtenant. The responsibility falls on the primary tenant. If the subtenant fails to pay rent or damages the rental unit, the primary tenant will have to deal with it. 
  • The Tenant Looks for the Subtenant. The landlord won’t have work to do finding a subtenant. The original tenant will take care of that matter. 

Disadvantages for Landlords

  • Communication Breakdown. Communication between parties can be difficult if you allow a third-party person to rent the property. You can’t always rely on your primary tenant to tell you about issues and complaints by the subtenant. It’s not easy to track things down if you allow your original tenant to sublease. 
  • Unreliable Screening Procedures. Unless you’ll handle the screening itself, you can’t be sure about the trustworthiness of subtenants renting your rental unit. The original tenant may be less concerned with the qualifications of the subtenant, and this can be problematic for you as a landlord. 
  • Breach of the Lease. The subtenant can disobey house rules or breach the lease altogether. For instance, having loud parties in the rental property can be a problem for landlords.  Blatant violation of the lease agreement can be a reason to evict the subtenant or the primary tenant. 
  • Property Damage. A subtenant damaging your rental unit is another problem landlords face since the person may only be renting the unit for a short period. 

Final Thoughts

Allowing your tenant to sublease your rental unit to another has its advantages and disadvantages. It’s all up to you as a landlord to decide on this matter. But have to weigh the pros and cons and set a reliable screening procedure to avoid problematic subtenants. Also, discuss with your primary tenants your rules on subletting. 

Topics: landlord tips, landlords, rental property tips, rental unit tips