Allowing tenants to sublet can be a smart or a risky move, depending on how you handle it. There are no one-size-fits-all policies you can set, since all renters are different. Some may be responsible while others are not.
You need to weigh the pros and cons to determine whether allowing tenants to sublet their rental units would be beneficial or damaging to your rental business. Here’s a breakdown of outcomes that can come from allowing renters to rent their leased unit out.
Key Highlights:
- Subletting can help reduce vacancies and retain good tenants: Allowing sublets gives tenants flexibility during temporary relocations, helps maintain occupancy, and increases the likelihood of lease renewals.
- Occupied units are easier to maintain than vacant ones: Continuous occupancy helps prevent unnoticed issues like leaks, mold, pests, and other forms of deterioration that can worsen when a unit sits empty.
- Subletting can lower turnover and marketing costs: Keeping a unit occupied avoids expenses tied to move-outs, repairs, cleaning, renovations, and repeated marketing efforts.
- Risks include unqualified subtenants and legal exposure: Without clear rules, subtenants may fail to meet screening standards, create communication issues, or expose landlords to disputes over rent, damages, or liability.
- Clear subletting rules are essential for protection: Requiring landlord approval, enforcing screening standards, holding the primary tenant fully responsible, and setting limits on duration and rent handling help minimize risks while allowing flexibility.
Benefits of Allowing Subletting
Reduced Vacancy Risk
Subletting helps present vacancies when tenants need to relocate for work, school, or personal reasons temporarily. Naturally, no one would want to pay for a rental unit they are not living in. Allowing tenants to sublet is a great way to compromise for the sake of keeping their tenancy.
Additionally, tenants will be more likely to renew their contract when they know that you can be flexible with the lease agreement. Allowing renters to sublet shows that you trust them to manage their own tenant, but be sure to set down rules still.
Consistent Property Occupancy
An occupied unit is less likely to suffer neglect or unnoticed maintenance issues compared to a vacant one. Normal wear and tear is never the only thing a landlord has to worry about over time, since property deterioration happens with or without occupants.
Some of the invisible property damage that can get worse when unaddressed include mold growth, pest infestation, burst pipes, roof leaks, and other maintenance issues you might miss. While regular inspections can prevent this, it would still be preferable to have someone keep an eye on the unit every day.
Less Turnover and Marketing Costs
Losing a tenant doesn’t only mean a loss of rental income. It also comes with expenses that involve re-renting a unit, such as cleaning, repairs, renovations, and marketing expenses. When rental demand is low, you can even end up with higher marketing costs over time.
When tenants leave the rental property, you also have to account for potential wear and tear from moving furniture or other belongings, which frequently happens during the move-out process. Since most are considered normal wear and tear, you will have to cover the costs.
Risks of Allowing Subletting
Unqualified Subtenants
Subtenants may not meet your screening standards if the process isn’t clearly defined. Since your tenant will be the one to find a subtenant, they might end up finding a bad resident that you have to deal with for the sake of your other tenants if you have a multi-unit property.
Communication may also be a problem. In some cases, you need to loop your main tenant in for discussions, which can lead to delays in handling issues if you cannot contact them. This, of course, can be avoided by setting down rules and limitations for subletting.
Legal and Liability Issues
Just like your own tenants, subtenants can also cause issues in your rental property. If not documented correctly, there may be disputes over rent, damages, and even injuries sustained on rental property premises.
This is why sublessors and sublessees need to discuss the occupancy arrangements comprehensively, considering how a sublease agreement is still a legally-binding contract, and that the sublessors are still responsible for consistent payment or rent and damages.
Irresponsible Sublessors
You have to anticipate that your main tenant may not be as compliant when they no longer live in the rental property, which means you could experience trouble with receiving rent payments or contacting them should the subtenant violate lease rules.
When a good tenant turns into a bad sublessor, you may have to resort to eviction to protect your investment property, which is a lot more work than terminating their lease to begin with.
Subletting Rules Landlords Should Include
- Landlord Consent: Clearly state in the lease agreement that subletting is not allowed until a written approval is obtained from the landlord. That means the tenant must submit a written request, which outlines the specific subtenant and the duration for which they will stay in the rental unit.
- Screening and Approval Standards: Since they will live in your rental property, the subtenants must meet the same screening criteria standards that your primary tenants have. This gives you some final say in who stays in your rental property.
- Full Responsibility of Sublessor: Explicitly include that the sublessor will still be liable for rent payments, property damage, lease violations, and the other actions of the subtenant, as this reduces potential disputes over who answers for payments and violations.
- Durations and Limits: Set boundaries around how long and how often subletting is allowed. For example, some landlords only allow three to six months of subletting, with no consecutive sublets allowed.
- Rent Payment Rules: The primary tenant must adhere to a set rent payment schedule. The sublessee will pay rent to the primary renter, who will then send the payment to the landlord or property manager. There will be no rent negotiations without the final approval of the landlord.
Subletting FAQs
Can a tenant sublet without the landlord’s permission?
- In most cases, no. If the lease agreement prohibits subletting or requires landlord consent, tenants must obtain written approval before subletting. Unauthorized subletting is typically considered a lease violation and may result in penalties or eviction.
Who is responsible for rent during a sublease?
- The original tenant remains fully responsible for paying rent on time, even if the subtenant fails to pay. The landlord’s legal relationship remains with the primary tenant, not the subtenant.
Can landlords screen and approve subtenants?
- Yes. Landlords should require subtenants to meet the same screening standards as primary tenants, including background checks, credit requirements, and rental history. Final approval should always rest with the landlord.
What happens if a subtenant damages the property?
- The primary tenant is responsible for all damages caused by the subtenant beyond normal wear and tear. Landlords may deduct repair costs from the original tenant’s security deposit or pursue additional compensation if necessary.
Ensuring All Tenants are Cared For
Whether they’re tenants or subtenants, it’s important to ensure satisfaction for all your residents. Conducting property upkeep and addressing tenant concerns are among the core responsibilities of a landlord that help achieve that.
We can help you be more efficient and effective in your property management duties. Here at Temecula Property Management, you will have access to the resources and expertise you need to maximize the profitability of your rental property.
Call us today, and we can discuss how we can help you!
