In every lease, there will be clauses. You’ll find that one of these clauses will cover subletting and assigning. Subletting allows a tenant to sublease a part or all of the property while assigning means putting the lease in someone else’s name for what’s left of the lease term. It’s important for the landlord to carefully consider these topics and what they want to allow along with the state laws (not all states permit this). Two sample clauses, from Law insider, are listed below (you can visit the hyperlink for more examples).
- “Tenant may not assign or sublease any interest in the Premises, nor effect a change in the majority ownership of the Tenant (from the ownership existing at the inception of this lease), nor assign, mortgage or pledge this Lease, without the prior written consent of Landlord, which shall not be unreasonably withheld.”
- “The Tenant(s) shall have the right to sub-let the Premises or any part thereof without the prior written consent of the Landlord. The Tenant(s) will be responsible for all actions and liabilities of the Sublessee including but not limited to: damage to the Premises, non-payment of rent, and any eviction process (In the event of an eviction, the Tenant(s) shall be responsible for all court filing fee(s), representation, and any other fee(s) associated with removing the Sublessee).”
Both subleasing and assigning can have some pros and cons. Tenants who sublease are still on the lease and have more control. However, they’re also held accountable for the sublessee. And subletting will require more time and expertise from the tenant.
When it comes to subletting, tenants typically do this because they don’t need the whole space and are looking for help to pay the lease or they no longer need the property and don’t want to pay the termination fee. However, tenants may also have the option to discuss assigning the lease to someone else (if they want to give up their rights to the property completely). This is all dependent on what the lease and the state laws allow.
Landlords of course prefer when they find tenants with whom they can deal directly. However, when subletting, the sublessee will often deal directly with the subletter. Whereas during an assignment, the new person on the lease will deal directly with the landlord. Some landlords will approve subletting and assigning as a way to ensure income. This way if a tenant is strapped for cash and/or their business goes under, it allows the landlord to still collect a steady income. There can be some concerns with subletting since the subletter will ultimately be choosing the sublessee and the landlord doesn’t typically have direct contact with them. That’s why it’s important to include something in the lease that the “the tenant(s) will be responsible for all actions and liabilities of the Sublessee” as mentioned in the second example above. It’s also a good idea for landlords to require tenants to provide a written consent and the landlord’s approval before being able to sublet a rental unit. This provides the landlord with a little more control and protection. The same goes for assigning a property, since tenants are also given the ability to choose a new assignee if the lease permits this.
If a tenant is allowed and decides to assign the property to a new person, depending on applicable laws, the landlord can determine whether to release the original tenant from financial commitments of the property or not. The tenant will be required to have a lease assignment filled out. This would include any terms and provide a copy of the original lease.
If a tenant is permitted and chooses to sublet, then it’s important they do a thorough screening to locate a reliable renter. They’ll also need to have a sublease agreement created and signed. Keep in mind that the terms from the original lease will often apply to the sublessee as well. Once a sublease is signed, the original tenant is now considered a sublandlord. The sublessee would have to pay their rent to the sublandlord. The sublandlord would still be required to pay the original agreed upon rental fee to the landlord. The sublandlord would also be required to handle any other responsibilities that relate to the sublessee, since they are the ones with direct contact to them and on the original lease.
Choosing to sublet or assign a property is a big decision for a tenant. It’s also an important topic for landlords to consider carefully before having a lease created. And these are just two of the essential things to cover in a detailed lease. If you’re a landlord looking to create a thorough lease and want assistance with managing your property, please reach out to us at PMI. We can help enhance and protect your investment.
