What Landlords Need to Know About Subleasing

Making sure that all property units are rented and that the monthly rent is paid on time are the top priorities of busy property managers and landlords everywhere. However, sometimes situations change and tenants need to move out early. So, the million-dollar question is should you allow your tenants to sublease your rentals? Here’s what landlords need to know about subleasing.

Getting the Leasing Lingo Right

When it comes to subleasing an apartment or rental home, there are typically two options – to sublet (or sublease) or to assign a lease.

Subleasing: According to LawDepot.ca, “subleasing (also called subletting) is a legally binding contract made between a tenant and a new tenant (also known as a subtenant or a sublessee). The sublease gives the subtenant the right to share or to take over the rented premises from the original tenant. Typically, the subtenant pays rent directly to the first tenant while the first tenant pays rent directly to the landlord. Alternatively, the subtenant can pay the rent directly to the landlord. The landlord still holds the first tenant directly responsible for the rent and for any damage, including any caused by the subtenant. Usually, the first tenant must get consent from the landlord before he/she is allowed to sublease the premises.”

Assignment:  On the other hand, “assignment” means that a new tenant takes over the original tenant’s lease obligation and the original tenant’s relationship with the landlord is now legally finished. All rights and responsibilities are assumed by the new tenant, or assignee.

A soon to be tenant signing a leasing agreement

Short Term Leasing vs Long Term Leasing

You can have both short-term subleasing or long term subleasing.

Short Term Leasing

If the original tenant plans to leave the rental unit for a short period of time, a short-term lease is generally the most suitable option. This often happens when a student rents out their apartment for the summer months while they return to their hometown. Another example could be when a someone decides to go travelling for two or more months, and doesn’t want to have to pay for an empty apartment.

Long Term Leasing

Long-term leasing occurs when the original tenant plans to leave permanently. The intention then is for the new tenant to take over the residence for the remainder of the lease term. While the tenant may opt to sublet, most often in long term leasing scenarios, the lease is then assigned to the new tenant, absolving the existing tenant of their responsibility.

The Subleasing Process

Most leases forbid a tenant from subleasing their rental unit without obtaining the landlord's prior written consent and complying with the terms set out in the lease. As a result, most subleases are conditional on the tenant obtaining the landlord's written permission to the sublease.

Generally speaking, when a tenant subleases their apartment, it is up to the tenant to find a suitable new tenant. However, whether it is a sublet or an assignment, the landlord should follow some basic steps to ensure a high-quality tenant and the success of the lease.

1. All sublease or assignment tenants should be screened. This is a critical step in ensuring the new tenant has the means to pay for the rental unit.

2. Ensure monthly payments. Online rent payments help eliminate disputes and help ensure on-time payment. If your tenant is subleasing, make sure they know they are still on the hook for the rent, and if there is an assigned tenant, set them up to pay online with a credit card or debit card.

Signing a lease or sublease agreement

The Bottom Line

Allowing tenants to sublet or assign their leases can be a win-win for both the renter and the landlord. The trick to success however, is to have clear wording in your leases about subleasing, and to carefully vet new tenants and ensure continuous cash flow.

Provincial Guides

Here are a few handy guides for additional information and resources.

Alberta – Subleasing a Rental Unit

BC – Sublet & Assignment

New Brunswick -Assigning and Subletting

Ontario – Assignment and Subletting

Quebec – Assigning a Lease or Subletting

For additional information on sublets and assignments, visit your provincial or territorial government landlord and tenant office.

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