Sublease Agreements

Sublease agreements are popular contracts in both commercial and residential markets, but the rules for subleasing in these settings are very different. Use our guide to learn answers to common questions about how residential and commercial subleases work.

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What Is a Sublease Agreement?

A sublease agreement is a written or verbal agreement between an original renter (tenant) and a third-party (subtenant). In a sublease, the subtenant agrees to pay the tenant rent money for use of the rented space. In turn, the original tenant continues to pay the landlord rent as described in the original lease.

In a sublease, the original tenant remains legally responsible for the original commercial lease or residential lease. Therefore the original tenant is liable for rents paid and any damages done as prescribed by the original lease.

Subleasing allows the original tenant to honor their legal obligation to the lease without the burden of paying for a physical space they aren’t using.

Done correctly, subleasing is legal and can be beneficial to all parties. Done incorrectly, a sublease can lead to legal issues for the tenant and subtenant.

Key Terms & Definitions

Whether you are seeking to sublease your apartment or looking for a short-term stay, there are several terms and important synonyms worth knowing:

  • Landlord/Lessor
    Both of these terms refer to the person who runs (and potentially owns) the property to which the lease applies. This is the person collecting the rent and who has a legal contract with the tenant.
  • Sublessor / Lessee / Tenant / Sublandlord
    These terms all refer to the original tenant who signed the original lease with the landlord. Regardless of who they sublease the space to, this is the party legally obligated to fulfill the original lease.
  • Subtenant
    The subtenant is the party who agrees to occupy the space and pay the original tenant for that space.
  • Original Lease / Master Lease
    This is the lease signed by the original tenant. In the case of a sublease, this lease will continue to be legally binding. In the case of a sublet, this lease may be replaced.
  • Sublet vs. Sublease
    Typically, the terms “sublet” and “sublease” are used in specific situations, but the terms are often conflated. In most contexts, when subletting, a new tenant takes over the existing lease with the landlord. When subleasing, the original tenant remains legally responsible for the fulfillment of the lease. Regardless of the word used in your agreement, make sure you understand what you want to accomplish and whether those parameters are indicated properly in the sublease or sublet agreement.

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Residential Subleases

Though subleasing a residential space is relatively common, residential leases often forbid subleasing. For this reason, subleasing in residential real estate is frequently done without a landlord’s consent and without a formal sublease. But such arrangements can lead to ugly legal problems when things go wrong.

Below are some steps you can follow to help arrive at a legal sublease arrangement, regardless of whether your lease prohibits subleasing.

Does my lease allow subleasing?

Before you do anything else, check your lease to see what your landlord has to say about subleasing. Keep in mind that state regulations supersede a lease agreement in cases where the two conflict. If your lease prohibits subleasing, use the information below to see if your state regulations permit this restriction.

How do I find and vet a subtenant?

As a tenant, the burden of finding a subtenant will likely be on you. You may want to start by asking people you know if they’re looking to sublease or know someone who is. If you are required to obtain your landlord’s consent, having a trustworthy person lined up will likely help persuade.

With that in mind, consider doing the following once you have a subtenant lined up:

  • Run a background check
    It’s always advisable to run a background check with a reputable service.
  • Ask for references
    Collect 2-3 personal references and check them.
  • Ask for rental history
    Collect information for 2-3 prior landlords and call them to verify trustworthiness.
  • Conduct a walk-through
    Before signing a sublease, conduct a walk-through with the subtenant, noting any existing damage. This will allow you to later prove any damage done by the subtenant was not a previous condition.

What information should I include in a residential sublease?

Residential subleases should generally contain some common elements. It is extremely important to have a legally sound residential sublease that speaks to all necessary and relevant terms. The following list is not comprehensive, but provides a basis for the type of information a residential sublease may need to include:

  • Premise
    Address and limitations of the space. For example, is the sublease for one room and shared living space or the entire rental?
  • Tenant
    Include the full name and address of the original tenant.
  • Subtenant
    Include the full name and permanent address of the subtenant.
  • Term
    The duration, start, and end date of the sublease.
  • Rent amount
    Specify the amount of rent the subtenant will owe each month, exactly when it will be due, and who it will be paid to.
  • Security deposit
    How much will the subtenant owe in a security deposit? Make sure this amount does not exceed the maximum allowed in your state.
  • Late fees
    Will a late fee incur if rent is missed? If so, how much and when does it apply?
  • Utilities
    Specify who is responsible for the utilities. If utilities are shared, specify how they’re divided.
  • Policies
    Will pets be allowed? Smoking? What happens if the subtenant participates in illegal activities on the property? Detail this so it is clear later.

Signing a Residential Sublease Agreement

A sublease is a legally binding contract—as such, it has maximum enforceability if signed. As the original tenant, remember that you will ultimately be liable for fulfilling the original lease. This means you will be liable for any damages done by the subtenant. Having a solid, signed sublease agreement in place can offer legal remedy if you end up on the hook for damage you didn’t inflict.

It is ill-advised to sublease your apartment or room without clear legal authority to do so. But even if your sublease agreement has not been authorized by your landlord, it may still be enforceable, especially if it’s signed.

Does your sublease agreement have the necessary elements?

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Commercial Subleases

Commercial subleases can be more complicated than their residential counterparts. Though they are common in the business world, commercial subleases have few protective laws and regulations in their corner. As such, they tend to be highly specific so that all potential situations and problems are spoken to in the terms of the agreement.

Should I contact my landlord before subleasing commercial space?

When it comes to subleasing commercial space, you’ll likely want to contact your landlord regardless of what your lease says about subleasing. Subleasing is standard practice in commercial environments, and commercial landlords are typically quite involved in the process. You may even be able to work with the landlord to negotiate sublease terms in your favor.

What information should I include in a commercial sublease?

Though every commercial rental situation is unique, there are some common elements that most commercial subleases should contain. It is important to make sure that the agreement works for you and your business, and that all terms are sound. Having an agreement with missing or problematic elements (such as if the duration is wrong or the premise is inadequately described) could potentially cause more harm than good.

The following information is far from exhaustive, but many commercial subleases include the following terms:

  • Premise
    Address and limitations of the space. For example, include whether the subtenant is renting an entire office building or a single office.
  • Tenant
    Include the business name and address of the original tenant.
  • Subtenant
    Include the business name and current address of the subtenant.
  • Term
    The term is the duration of the sublease, including start date and end date.
  • Rent amount
    Specify the amount of rent the subtenant will owe each month, exactly when it will be due, and how it should be paid and to who.
  • Security deposit
    How much will the subtenant owe in a security deposit? This amount will generally be paid to the original tenant.
  • Late fees
    Will an additional fee be owed if rent is late? Is there a grace period before the late fee kicks in?
  • Utilities
    Specify who is responsible for the utilities. If utilities are shared, specify what portion of the utilities are shared.
  • Shared work spaces
    If there are shared work spaces or break rooms, outline how these will be used and what the subtenant has access to.
  • Equipment allowed
    Outline any equipment on the premises that may or may not be used by the subtenant.
  • Emergency procedures
    Outline plans in case of fire or other emergency, including location of emergency equipment.
  • Changes to the property
    Can the subtenant make any changes to the property? What changes are allowed (if any)?

Signing a Commercial Sublease Agreement

For maximum enforcement capability, commercial sublease agreements should be signed and dated by the original tenant (sublessor) and subtenant.

Remember that commercial subleases are legally binding. Before signing, make sure the agreement has all necessary elements and that you’re on board with its terms.

Sublease Agreement FAQs

When is a sublease useful?

In both commercial and residential arrangements, sublease agreements can be useful for tenants when they wish to move out of a rental space before their term is up. Subleases can also be useful if tenants wish to leave the space for a specific amount of time before returning. For potential subtenants, subleases can be especially beneficial for those who don’t want to enter a full-term lease.

Will subleasing hurt my credit score?

No. If subleasing is done legally, it will not hurt your credit score. But if done outside the specific legislation of your state and the specific lease you are under, a sublease can hurt your credit score if it results in unpaid rent.

Is subleasing illegal?

Though the laws vary state to state, in most cases subleasing is not illegal. However, subleasing may be a violation of your lease if you do not obtain written permission from your landlord.

Is a sublease agreement legally binding?

Yes. If executed properly, a sublease agreement is a legally enforceable contract between parties. If you break a sublease, you will be bound by the terms of the contract.

Is the sublease I signed enforceable if I did not get permission from my landlord?

It may still be enforceable. As a tenant, if you take a subtenant to small claims court, the fact that the landlord did not condone the sublease might not matter. However, the sublease’s enforceability (or lack thereof) will depend on your exact situation. If you have questions, it may be helpful to speak with a lawyer.

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