Sublease

A sublease is a rental agreement where the original lessee(tenant) rents out the premises to another person called the sub-tenant or sublessee. The new tenant gets few rights as the sublessee. The original tenant (lessee) can only give those rights to the new tenant (sublessee) which 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 risk is borne by the lessee.

Risks for Lessor

The lessor has to be cognizant of various issues while allowing sublease of his property. The original tenant, who will now be the sublessor. should thoroughly check and screen people before allowing to become a sublessee. 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.

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

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 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 agreement as a lessee.

Example of a Sublease

Sublease is useful and a great method to minimize your living expenditure if you are not going to be using your accommodation or premises for a certain period of time. Renting out apartments to students or commercial space like godowns when not in use are a few examples.

Laws

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

References:

https://www.thebalance.com/leasing-definitions-what-is-a-sublease-3514927

https://www.investopedia.com/terms/s/sublease.asp

https://www.rocketlawyer.com/article/the-dos-and-donts-of-subleasing.rl

 

Last updated on : June 5th, 2018

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