As a property owner, you hope to find incredible tenants who stay in your unit for years at a time. But the fact of the matter is, that doesn’t always happen.
Your tenants may decide that renting isn’t for them and they’d rather invest in purchasing their own home. A new job or a family issue can cause them to move to a new area quickly. They may decide that they need more space, a yard, or an extra bathroom, and want to move on to a different rental situation. Whatever the reason, as a property owner, you will run into the situation of a tenant needing to move out of your property before their lease is up.
Many tenants will ask if they can sublet the unit for the remainder of the lease. As a property owner, this places you in the midst of a tough decision. Should you allow them to sublet? Should you not? What are the costs and benefits to each situation? And what’s the worst that can happen?
What Is Subletting?
Before we dive too deep into whether or not you should allow your tenants to sublet, let’s get clear on exactly what that means. When you rent your property to your tenant, you become their landlord and they become your tenant. Subletting is when your tenant chooses to move out of your property prior to the end of the lease and rents the unit to a third party. In that case, the tenant becomes a landlord to the subletter.
Tenants want to sublet for a number of reasons, primarily to avoid paying any fees associated with breaking their lease.
Related: 4 Warning Signs You Have a Tenant Turnover Problem
Pros and Cons of Subletting
There are very few reasons that would be considered a “pro” for allowing tenants to sublet. The only real pro would be that they are responsible for finding a subletter to move in, which would take some of the burden of tenant search and screening off your plate.
However, the pros end there… and the cons list is long.
When you agree to let your tenants sublet your property to a third party, you’re essentially passing the landlord duties over to them. That means they’ll be responsible for collecting rent and managing the new tenants. However, it also means that you have virtually no legal rights over the subletter.
Once your tenant sublets to another person, you have no legal rights to manage that person and their residency in your property. You can’t collect rent, you can’t enforce any of the terms of the original lease, and you can’t evict them if they choose not to pay rent. If they damage your property, cause problems with your other neighbors, or blatantly violate your lease terms, there’s nothing you can do.
This puts you in a precarious position as a property owner. While you would hope that your original tenant would sublet to a responsible person, that’s not always the case. Your original tenant has far less to lose than you do if someone stops paying rent or if they damage your property. Often, they just want to get someone into the unit to relieve them of the responsibility of paying the rent.
The Exception to the Rule
Now, while most times subletting is not in your best interest, there are exceptions to every rule, and there are certain things you want to consider before making a final decision.
If a tenant you trust needs to move away temporarily, say to take care of a sick relative or to go on an extended business trip, it might make sense to allow them to sublet for a short period of time. We only recommend this for tenants you’ve known and rented to for a long time, and have a high level of trust with. If you want to keep them as a tenant, allowing them to sublet for a brief period can be advantageous for both parties.
However, in most instances, it’s likely in your best interest to deny tenant requests to sublet.
Related: How to Increase Rent While Keeping Your Tenants Happy
What to Do If a Tenant Asks to Sublet
If a tenant comes to you with a sublet request and you decide to (wisely) decline, here are a few tips on how to handle the situation:
Refer to the Lease
Ideally, you have a lease termination clause within your lease that outlines what happens when your tenant wants to break the lease. When they ask you to sublet, you can simply refer to the lease agreement and say you handle all early lease termination according to the policy.
Ask Them to Find New Renters
If a tenant wants to break a lease early and avoid paying a hefty early-termination fee, you can also ask them to assist in finding new tenants before they leave. Now, you’ll need to make it clear that these tenants have to be up to your standards and pass your screening process, but if you want to work with your tenant, you can lower or waive the termination fee if they’re able to find approved new tenants before their proposed move-out date.
Whatever way you look at it, allowing tenants to sublet is almost always a bad idea. Protect yourself, your property, and your sanity, and decline when a tenant requests to sublet your property.