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A sublease is just a rental agreement between a person who wants to take over and someone who leased an apartment or house. Typically, it's created when a tenant can't continue meeting the terms of his lease as agreed. The tenant could lease it out and remain liable to the owner under the original document. With that, the new tenant is now the subtenant.

Here is the legal definition of sublease:

Noun:

  • A legal agreement where a person renting an apartment or house rents it to another party.

Verb:

  • To engage in subleasing any dwelling to another or to grant a sublease.

Origin:

  • Middle English
  • 14th century

What Is a Sublease Agreement?

A sublease is an original lease agreement created by the original tenant who wants to lease part or all of a property from the landlord. It's up to the landlord whether the original tenant can create a sublease. The landlord could give the original tenant written permission as long as there is no clause in the original agreement that prohibits it. If a clause exists, the original tenant and landlord could revise the lease agreement for subleasing.

It's important to note that a sublease isn't a new lease between a new lessee and the property owner. In fact, it's still between the original tenant and a new lessee.

Regardless, the landlord still expects rent payments from the original party. Ultimately, the subtenant must make payments to the original person, who then pays the landlord.

Reasons for a Sublease and Lease Agreement

Usually, a tenant wants to create a sublease because some situation arose that prevents them from fulfilling their lease agreement. For example, Joe rents an apartment in New York City and agrees to a 24-month lease. However, six months later, he gets a job offer in California. He could sublease the apartment to another tenant for the remainder of the agreement.

By subleasing it, he can move to California without breaking the lease and suffering the financial penalties within the contract. This is also beneficial to the landlord because they don't have to find a new tenant and miss out on a month or two of rent. Most property owners don't allow the tenant to sublease because it removes control over the landlord of the property.

When creating a sublease, Joe keeps control over the apartment. If his job falls through, he can give the replacement tenant notice to get out of the apartment and move back in.

Residential Sublease for a Property Owner and Tenant

In general, a residential sublease is a legally binding document drafted between the tenant and the subtenant, with the original tenant retaining the right to move back within the contract's time period.

Residential sublease agreements must explain the rights of the sub-landlord and the subtenant. With that, it should detail the responsibilities of each party. All obligations and rights begin when both people sign the new agreement.

With that, a sublease agreement could be drafted when someone leasing the apartment or home must move out temporarily or permanently but hasn't reached the end of the lease. If allowed, they could find a new tenant, entering into a residential sublease agreement with them.

A tenant can also sublet only a portion of that property, such as one bedroom. With that, the original tenant is responsible for maintaining the full property and making rental payments on it. This is called a roommate-style sublease and still requires permission from your landlord.

Properties that could be sublet include:

  • Garage
  • Room on the premises
  • Basement suite
  • Townhouse
  • Duplex
  • Apartment
  • Condo
  • House

Commercial Sublease Agreement

A commercial sublease agreement is just a business version of the regular sublease agreement. However, the difference is that the tenant is subletting a commercial office space that can be used for their business. For example, a jeweler could rent out office space in the strip mall and must sign a commercial agreement.

With that, a commercial agreement contains business responsibilities and general terms. They could relate to the business equipment allowed, insurance on the office space, and more.

Ultimately, a business could create such an agreement if it operates seasonally to save money during off periods. With that, it only uses the office space  during its peak seasons and rents out the original lease when it isn't using the facility.

For example, if a business specializes in Halloween gear, it might rent the space during the fall months and then sublet it to another company for the rest of the year.

Alternatively, a person could enter such an agreement for a bigger space with many retail locations. That way, they could sublease each shop.

Additional reasons to consider a commercial sublease agreement can include:

  • The company works regularly with contractors and consultants and wants to share the rent with them. That way, everyone saves money and works from the same space at a lower cost.
  • The original lessee can't keep up with the lease and is bound by the terms for the remainder of the agreement time specified.
  • Small companies want to share space with others to save money.

Here is a simple-to-follow example:

Jane is a hairstylist and rents a shop to start her own company. To make it more feasible for her, she divides her space into many booths and supplies the mirrors, counters, and chairs. Then, she chooses to rent out each space to other stylists. Technically, this is a sublet situation, even though each space rented is contained in the shop that she rents from another entity.

How to Sublease an Original Lease

People interested in subletting a commercial or residential space might not know where to begin. First, you must double-check the laws of your state and the ordinances of the county or city where the property is located. Some states or cities don't allow apartments, homes, and single rooms to be rented for over 30 days if the lessee isn't living there. If you violate the law, you could have huge fines to pay, and the landlord could terminate your lease because of it.

With that, some cities/states don't allow you to sublet four or more units at one time.

Once you know that the property can be subleased, the original tenant needs to get permission from the landlord to sublet it. Most rental agreements have a clause barring the tenant from subletting without written approval from the landlord.

The next step is to find another suitable tenant who is trustworthy and reliable. Since the existing tenant continues to remain responsible for the property condition and rent payments, this is crucial.

In the sublease arrangement, the original tenant needs to specify that the subtenant must pay rent to them and that they are subjected to the same lease term rules in the original lease. It's a good idea for tenants to attach a copy of relevant terms in the lease to avoid confusion later.

Those who don't know how to word the agreement should talk to an attorney who understands these matters. It's also possible to download an online template and customize it to your needs.

Conclusion

Ultimately, tenants must understand what they are allowed to do. They are responsible for paying rent and any interest accrued for nonpayment. However, certain conditions come about where they can't afford rent, can't make more money, and consider subleasing the building or parts of it to another person.

Whether it's a direct lease from a manufacturer to a subtenant or you want to sublease space to someone else, it's crucial to understand what the word means and how to go about it legally.

Ultimately, it is up to the landlord to determine if subleasing is appropriate. Otherwise, he or she might make you pay any fees for breaking the lease. Regardless, you have the information needed to decide if subleasing can work for you and the other parties concerned.

David Bitton

David is the co-founder & CMO of DoorLoop, a best-selling author, legal CLE speaker, and real estate investor. When he's not hanging with his two children, he's writing articles here!