Sublease Contracts
A sublease contract is a legally binding agreement that allows a tenant to rent out all or part of their leased property to another individual, known as the sublessee. This arrangement can benefit both the tenant and the sublessee, as it allows the tenant to share the cost of rent and the sublessee to find temporary housing without committing to a long-term lease.
If you are leasing a property from another, you may have various reasons to rent all or part of it to another. However, whether you can sublease the property depends on the terms of your original contract with the landlord. Should you decide to sublease the property, you may need the landlord’s approval since they certainly have a stake in the matter. Then, you must be extremely careful since you still have an original agreement with the landlord, which remains in effect.
Sublease agreements can be complex and fraught with risk since they involve three potential parties. Any choices that you make now can cause consequences in the future. Nonetheless, there may be benefits of a sublease agreement that lead you to consider it. Still, you should proceed with care.
Contact a real estate lawyer if you are already a party to a lease agreement or wish to sublease property. Their efforts can protect your interests and lead to a sublease agreement that benefits both parties. Real estate attorneys should be part of all aspects of the sublease process, from drafting the initial deal to representing their clients in any disputes that may arise under its terms.
What Is a Sublease?
A sublease is an agreement between the original tenant (lessee) and a third party (sublessee), where the sublessee will rent some or all of the property subject to the lease agreement. One may sublease a property when they leave it for an extended period or do not need all the space.
A sublease should be a formal written agreement between the lessee and the sublessee. It is a binding lease, just like the original one, directly between the lessee and the sublessee. Unless the sublease specifies otherwise, the sublessee has no legal relationship with the landlord. Still, the lessee will maintain their relationship with the property owner as defined in the terms of their original lease. The lessee is still responsible for paying rent to the landlord according to the terms of the original lease. The sublessee will make their payments to the lessee, and if the sublessee breaches the contract, the lessee still has an obligation to pay rent to the landlord.
Subleases can occur in both residential and commercial lease contexts. Although no sublease agreement is simple, those in commercial real estate may be more complex due to the terms of the original lease. It is best to tailor your sublease to your exact situation.
The Tenant’s Perspective in a Sublease Agreement
The landlord can even end the lease entirely and evict the tenant if they do not follow the lease to the letter. Thus, the tenant must carefully negotiate the sublease agreement in light of their relationship with the landlord. In the end, if something goes wrong with the sublease agreement, it is not a valid excuse if someone sues the lessee for breach of contract.
The Landlord’s Perspective in a Sublease Agreement
The original landlord has their interests that come into play for a potential sublease agreement. On the one hand, they want to protect their own property at all costs because they may ultimately have to live with the consequences of any damage. Thus, they want the right to restrict subleases or, at minimum, to have a say in who can sublease the property. On the other hand, the landlord also does not want you to break the lease, and they may want to continue doing business with you for some time.
The landlord may want to add terms to the original lease contracts that govern how and when a sublease may occur. They usually want the right to approve a sublease on a case-by-case basis. The landlord should review the initial lease terms to ensure they follow the original agreement. They may even want to obtain an indemnity or financial guarantee to protect them from liability or damages if the property gets subleased.
The Sublessee’s Perspective in an Agreement
The sublessee may want a flexible arrangement that is not a full-term lease because they only need part of a property or might only require it for a limited period. Subleases allow for a lower-cost option without the obligations of a direct lease with a landlord. The sublessee may want to be in a particular area, and no other properties that meet their needs are available.
They can move into the property quickly without dealing directly with the original landlord. Before deciding to sublease a property, one should determine whether a sublease or a direct lease best meets their needs. A sublease is still a legal agreement that imposes binding obligations on the sublessee.
Clauses in a Sublease Agreement
The clauses in a sublease agreement are essentially the same as those in any agreement. Since the original tenant may be liable to the original landlord, they may want to negotiate additional restrictions and protections in the sublease contract. The sublease agreement will identify the parties, namely the original and subleasing tenants. There is also a lease term and the amount of money the subleasing tenant must pay. The sublease will specify whose responsibility it is to make repairs, and the original tenant must be careful about what they promise because they may depend on the landlord to make repairs. Finally, a sublease agreement will also state whose responsibility it is to pay for electricity and the costs of other utilities.
Like any agreement, a mechanism should address resolving conflicts between the parties. Since the original tenant is liable to the landlord for their damages, it is vital to have a solid mechanism that can effectively and promptly resolve conflicts. The sublease agreement still must comply with the overall law that gives the subleasing tenant rights. Nevertheless, the original tenants must act to protect themselves to the fullest extent possible under the law. Even if the original tenant already knows the subleasing tenant, every term should be in writing, and an oral understanding is not enough.
What Lessees and Sublessees Need to Consider
The lessee needs to vet whoever they may select as a sublessee carefully. After all, the lessee is legally responsible for their actions. Even if the lessee has a contract with someone they already know and trust, trusting another renter is entirely different.
The lessee must also closely review the terms of their original lease. If the landlord approves any sublease agreement, the lessee must submit it. The lessee can only conclude the deal with the sublessee if and when the landlord agrees.
The sublessee needs to consider whether the lessee has the right to agree. The last thing they want is to vacate the premises because the original lease either forbids subleases or the landlord never approved the sublease in the first place. The sublessee should request a copy of the original lease to review whether the agreement is allowed in the first place. They must also have clarity on what their obligations are under the terms of the contract.
Special Considerations in Commercial Subleasing Agreements
It is common for two parties to enter into a subleasing agreement in the context of commercial real estate. However, they need to consider some particular factors before reaching an agreement. The original tenant must consider their own needs, how much space they may need, and when. They should not sublease space they may eventually need during the contract term; the original tenant is bound by what they signed.
Commercial lease agreements often require the original tenant to cover certain costs during the lease. Depending on the original lease, they may even be responsible for all maintenance and expenses associated with the property. The sublease should reflect how the two parties divide the costs and maintenance obligations.
Finally, specific laws in your jurisdiction or state may govern subleasing agreements and their contents. It is helpful to research the laws with the help of a real estate lawyer so they are legally enforceable and reflect the prevailing law.
Sublease Agreement Disputes
Sublease disputes are complicated because there is a web of contractual relationships, but not all parties may have direct ties to each other. The landlord has an agreement with the initial tenant, and then the tenant has a contractual relationship with the subleasing tenant. Thus, there may be three or more involved parties in any dispute.
There may be a question about whether the subleasing tenant is liable to the initial landlord if there is any damage to the property. Typically, the original landlord only has a legal relationship with the original tenant because there is a privity of contract between them. Ordinarily, the landlord has no legal relationship with the subleasing tenant unless there is language in the sublease to the contrary. The landlord should consider their unique situation before initiating a contractual relationship with the subleasing tenant.
When to Hire a Real Estate Lawyer for a Sublease
If there are any disagreements over the lease, a court will look to the exact language of the contract to decide the controversy. Therefore, it is crucial that the sublease agreement is clear and definite and has no ambiguous terms.
A real estate attorney can draft the agreement to ensure it is sufficiently clear and protects their client’s interests. They can make sure you include important clauses that address issues such as rent payments, security deposits, maintenance responsibilities, and termination terms. The other party to the deal should also have their real estate lawyer review the contract to ensure that it meets their needs and provides them with the fullest possible protection. A real estate attorney can negotiate any potential changes with the other party before anyone signs the lease agreement.
Then, if there are any disputes pertaining to the deal, a party to a sublease agreement should hire a real estate lawyer. Early involvement from a real estate lawyer may allow them to resolve a dispute without litigation. An attorney can represent their client in court if the dispute needs litigation.
Another reason to seek the guidance of an attorney when entering into a sublease agreement is their ability to identify any potential legal pitfalls. They can handle local and state laws that may affect the subleasing process, such as landlord-tenant regulations or restrictions on subletting in your area. By complying with all relevant laws and regulations, you can avoid legal complications and protect yourself from potential liability.
Sublease contracts can be a practical solution for tenants looking to share the cost of rent or find temporary housing. However, consulting with a lawyer with experience in real estate law is crucial before entering into such an agreement. They can help you draft a comprehensive and enforceable sublease contract, ensure compliance with applicable laws, and protect your rights and interests throughout the process. With their guidance, you can enter into a sublease agreement with confidence and peace of mind.