Risks of subletting?

Question

I'm renting a house (in Mass. if it matters) to a group of three tenant, three friends on the same lease.  One of them just informed me she is purchasing a house for herself and wants to know if she can sublet.  The existing lease requires the written approval of the landlord if there's going to be a subletter.  What are the risks and other things to consider with this?  I'm a new landlord and don't have experience with subletting.  Questions that come to mind:

1. is there any paperwork or legal documents for me for a subletter, or is all the burden on the existing tenant?
2. is the original tenant legally responsible for rent payment to me and not the subletter?
3. if there is a problem with the subletter with rent payment or they don't want to leave at the end of the lease, are there any additional legal complications with eviction than with a regular tenant?
4. Anything else?

The tenant who wants to sublease would do the work of finding the subletter, and I'd require the subletter to go through the same screening the original tenants did, of course.

I suppose the other option is to swap out the potential subletter as a full tenant on the lease.

Any info or advice appreciated - Thanks.

-Jerry

Kathryn Daniel · Answer

Hi Jerry,

I have allowed subletting in the past at an apartment community I manage.  It always turns out to be a headache in my experience.  What we've done is, like you're suggesting, put the burden of finding the subletter on the leaseholder.  Once that person is found, we charge full application/admin/etc. fees to the subletter and make sure they pass all screening processes just like everyone else on the lease.  Then, we add their name to the lease as "John Doe (Sub-tenant)" and we keep the original leaseholders (including the one moving out) on the lease as well.

This holds the original tenant responsible should there be lease violations or lack of payment.  We make it very clear to the tenants that they are still on the hook if the subtenant does not fulfill his/her obligations to the lease.  Once they hear this, they aren't so interested in subletting anymore.

I hope this helps.

Marcia Maynard · Answer

We don't allow subletting and say so in our rental agreement.

We use MTM (month-to-month) rental agreements so it is easy to accommodate a person who is departing and remove them from the rental agreement. It is also easy to add an incoming person to the rental agreement.

With MTM or with longer term leases, changes can be made by adding an addendum to the rental agreement, or by terminating the old contract (by mutal agreement of all parties involved) and engaging in a new one.

It is not uncommon for the household make-up to change during the course of tenancy, so it is best you have a method in place for handling this.

Check with the landlord-tenant laws for your jurisdiction. In most jurisdictions, whoever establishes residency in your unit becomes your tenant, whether their name is on the rental agreement or not. They will have the same legal rights to tenancy as any other person who lives there. You need to make sure they assume the same responsibilities as well by engaging with them to either comply with your screening process and be added to the rental agreement as jointly and severally liable, or move on.

Also, when handling the security deposit, remind all the tenants that the security deposit stays with the account and will not be touched until the end of occupancy when all parties move-out and return possession of the unit back to you. If the three roommates all pitched in to pay the security deposit, then the outgoing tenant needs to get their share of the security deposit back from the other two, not from you. Also, when there is a change in household make-up re-evaluate if the existing security deposit is enough to cover your risk. If not, then adjust it upwards. At a future point in time when you do the final accounting for return of the security deposit, any amount to be refunded will be made to the current group as a whole, not individually. It will be up to them to sort out their shares.

Periodically during the course of tenancy and at the point of any change in household make-up (prior to a tenant moving out and/or a new tenant moving in), do an inspection of the premises. Charge for damages as they happen or as you become aware of them. This is also a good time to keep an eye out for lease violations and to reinforce the terms of the existing rental agreement.

Also, if you want to charge an administrative fee for your time and effort in doing the paperwork and coordinating a move-out/move-in, then do so. But make it reasonable.

Jerry Rubinow · Answer

Hi Marcia and Kathryn,

Thanks for the advice.  My impression after reading what you said (and talking with a real estate lawyer) is that while there probably isn't added risk to me with allowing a sublet, it does add complexity (there now being an extra person between me and the one paying the rent).  I'm leaning towards doing the following:

- do not allow sublet, but allow the tenant who wants to leave the option to terminate the lease early
- as a prerequisite to early termination, the tenant must locate a replacement who will pass a credit/reference check and is acceptable to the other tenants
- the departing tenant must pay a termination fee to cover the credit/reference check plus a little more for my legwork
- the tenants can work out any transfer of their shares of the security deposit among themselves

Risks of subletting?

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