Sublease

A sublease is a rental agreement where the original lessee(tenant) rents out the premises to another person. Such a person is the sub-tenant or sublessee. The new tenant gets few rights as the sublessee. The original tenant (lessee) can give only those rights to the new tenant (sublessee) that he has got from the original landlord (lessor). He cannot pass on more rights of use on the property. The flow of rent is from the sublessee to the lessee and the lessor/owner. The risk of rent is always mainly borne by the lessee. In case the sublessee is unable to make full or timely payment to the original lessee, the lessor is still entitled to his timely rents, and the lessee bears the risk.

Risks for Lessor

The lessor has to be cognizant of various issues while allowing the sublease of his property. The original tenant, who will now be the sublessor, should thoroughly check and screen people before allowing them to become sublessee. A creditworthiness check can be one way. There can be damages chargeable to the lessee, and he cannot do away with the responsibility of payment of expenses or damage. These eventualities have to be covered in detail n the sublease contract in case it is allowed. The sublease contract cannot charge more than the original lease contract, and the sublease contract is more like a private contract between the lessee and the sublessee.

Things to Remember for Lessee

As a lessee who will be a sublessor, it is important to take the permission of the landlord even with a provision in the contract. Local and national laws may require written consent, even if it’s a common phenomenon. The liability of the sublessee also falls on the sublessor with all effects, and appropriate screening is imperative for income level, criminal records, and other behavior.

Sublease

Subleasing is a convenient and lawful way to use an unutilized asset. But in no way can it be used to profit off the landlord’s property by subleasing at a higher rent.

Risks for the Sublessee

The landlord/lessor has to allow the arrangement for it to become legit. There has to be written permission to sublet unless it specifically disallows it. This can also become the ground for eviction if you are a sublessee. And if you have taken the premises with the lessee who has left without any information. Thus, it is important to be fully aware of the lease arrangements and conditions before getting into a sublease or sublet agreement as a lessee.

Example of a Sublease

A sublease is a useful method to minimize your living expenditure if you are not going to use your accommodation or premises for a certain period of time. A few examples of renting out apartments to students or commercial spaces like godowns when not in use.

Laws

There are various laws for subleasing in different countries. In general, if the lease doesn’t mention subleasing, it is usually allowed in the U.S. The landlord needs to approve the sublease contract as well as the sublessee. Many states and local municipalities allow subleasing despite having a no subleasing clause in the contract. San Francisco allows subleasing of occupants subject to certain screening standards set by the landlord.

Read more about various other Types of Leases.



Sanjay Borad

Sanjay Bulaki Borad

Sanjay Borad is the founder & CEO of eFinanceManagement. He is passionate about keeping and making things simple and easy. Running this blog since 2009 and trying to explain "Financial Management Concepts in Layman's Terms".

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