It was a quiet summer morning, but I had a strange feeling something odd was going to happen. It did not take long for my phone to ring and one of our property managers was on the line. “The tenant at 256 Sunset Dr. is going to move out and wants to allow his brother to take over the balance of his lease! In fact, he said he has to move out Friday. Isn’t subleasing against the terms of his lease?”
I responded “not exactly”.
Subleasing Is Allowed With Conditons
Requests to sublease are addressed in most leases. Here is an example from the WILMOTH lease.
ASSIGNMENT AND SUBLEASE: Tenant shall not assign or sublease any interest in this lease without prior written consent of the Landlord, which consent shall not be unreasonably withheld. Any assignment or sublease without Landlord’s written prior consent shall, at Landlord’s option, terminate this Lease.
The key language is that approval for subleasing won’t unreasonably be withheld. The subleasing laws in most states favor the tenant. The courts have generally ruled that the subleasing option may not be unreasonably denied. When receiving such a request it usually means reaching a joint decision with an owner as to the reasonableness of the requested new arrangement. If we can fulfill our most important objective of cash flow continuation, without adding additional risk, such requests are reasonable. Having a process to determine reasonable is important for a tenant to recognize. Finding somebody is moving out with only two days notice to decide about a potential sub-tenant is unreasonable.
Here is how a reasonable subleasing request is processed and the key facts all parties need to make an approval.
Tenant Is Still Obligated
When a tenant asks about subleasing the first step is to let them know that subleasing does not legally relieve them from the rent obligation. The lease still exists with the original tenant’s name as the obligor. Many tenants do not realize this obligation is not lifted. They also do not understand that their security deposit will continue to be held to pay for damages caused during the term of the lease.
The proposed sub-tenant will go through the same application and background check as the tenant completed. The tenant is not authorized to approve a sub-tenant moving in until this process is completed and approved.
What if the sub-tenant is not approved? The tenant will be obligated for all the rent due and the owner or manager will consider that they have abandoned the property. If the sub-tenant moves in, the owner will need to go to court and obtain an eviction.
As you can see, sub-tenant requests are difficult and a little sensitive. Sure, tenants have events that occur that cause a change in living requirements. The sub-tenant option may not always be the best route to solve the problem.
A few years ago I had a tenant come to me with the sublet agreement already executed and the new tenant in place. Besides the issue of approval, we prefer a tenant utilize our own documents. Most tenants have no idea how to document this transaction. We want to approve transactions that are legally binding, not on the back of a napkin. My preference is approval will be granted on the same document that extends the sublease.
When Does A Sublease Make Sense?
I prefer for a sub-lease to be proposed in situations where the tenant needs to leave for a period of time during the lease, but will return prior to the lease expiration. If this is not the case, it is preferable to enter a new lease with the proposed sub-tenant with the same rent and expiration dates as the original lease. A new tenant is screened and approved with a new lease. After a move-out inspection and settlement of their security deposit, the existing tenant’s lease is cancelled.
One sublet situation I recall running into was based on a late night infomercial. Supposedly, a tenant paying $750 per month rent found somebody who agreed to fill the term of the lease paying $1,000 per month to the tenant. The tenant felt he had just figured out a way to make an extra $250 per month. I am all in for good old American capitalism, but a situation like this is likely not going to end up well. Bottom line, the sub-tenant needs to have the same terms in the sub-lease as the original lease. Subleasing should not be done as an opportunity to make a profit. An owner should never approve such a transaction.
If you can avoid a sublet you should. The courts have made it hard to absolutely prohibit these requests based on the concept of reasonableness. The best response is usually to explain the actual ongoing liability to the existing tenant and provide a better option for the proposed sub-tenant.