Sublease agreements, also known as sublet agreements, differ from standard lease agreements. They are often created when businesses rent out some of the space in their premises to another tenant. They can also be used in residential settings when one tenant decides to bring in another tenant to their rented property to share the bills, to take the place of the original tenant temporarily, or until the expiration of the lease.
In this guide, we’ll explore when you need to draw up a sublease agreement.
This is a comprehensive guide for individuals and businesses looking to create or manage a sublease agreement. The content will cover the legal process of creating a sublease agreement, the responsibilities of sublessors and sublessees, and the potential risks involved.
We’ve written this for:
Tenants seeking to sublease part or all of their rented property
Landlords involved in sublease arrangements
Legal professionals advising clients on sublease agreements
Property investors and real estate agents involved in leasing and subleasing properties
After reading, tenants, landlords and property investors will have a clearer understanding of the legal considerations involved in subleasing a property and appreciate the benefits of legal assistance from expert sublease agreement solicitors for creating or reviewing sublease agreements.
Types of sublease agreements
There are two main types of sublease:
Residential sublease
Commercial sublease
Let’s discuss the main characteristics of each.
Residential sublease
In residential subleasing, an agreement is made where someone takes over all or part
of an existing lease.
There are at least three parties involved in a residential sublease:
The landlord
The original tenant who rents the property from the landlord
The subtenant, who rents the property from the tenant
Common reasons for subletting in residential contexts include:
A tenant may go travelling or move to another country for a while, a subtenant helps them pay the rent for their room
Change of income – a tenant may need to relocate to cheaper accommodation before the end of their contract
When a tenant moves out of a shared house and the space needs to be fulfilled to meet the contract’s terms
Extra space – some renters may have extra space and want the security and companionship of a roommate
Helping out – a tenant may need to help out family or a friend who doesn’t have anywhere else to stay
Subtenants and tenants share most of the same rights. Both are entitled to the exclusive use of their room and have the right for a landlord to seek permission before entering their room. Subtenants also have the same access to the services and facilities that the original tenant benefits from, including the use of utilities and the right to use common areas.
The subtenant can stay in the home after the original tenant’s tenancy ends and become the landlord’s direct tenant. They will then have the same terms as their existing tenancy.
Subtenants are not responsible for any debts, such as unpaid rent, that the main tenant owes to the landlord.
Commercial sublease
Subleasing is also very common in commercial property settings from office spaces to retail locations.
Commercial subleasing is the process of leasing or renting out commercial property from an existing tenant to another business, known as a subtenant. The existing tenant, the sublessor, becomes the landlord to the subtenant while remaining tenant to the main landlord.
The sublessor may opt to sublease part or the entire space to a third party. The subtenant will then pay rent to the sublessor, who must transfer this money to the landlord to fulfil their original lease obligations to the landlord.
Legal process for drafting a sublease agreement
The terms and conditions for a sublease are outlined in a sublease agreement, a legal contract between the commercial sublessor and the subtenant.
The agreement will set out the duration of the agreement, the amount of rent due, how the space can be used, and maintenance responsibilities.
When drafting a sublease agreement, there are some key steps to take and considerations to address.
Checking the original lease agreement
It’s important to review the original lease to ensure subleasing is permitted and to understand any restrictions imposed by the landlord. Consult the landlord before going any further to discuss the possibility of subleasing with them. They will be able to quickly let you know if they will impose any conditions on subleasing.
Some leases prohibit leasing, while others allow it under certain conditions with the landlord’s permission.
Drafting the sublease agreement
If you have been given the go-ahead by your landlord, you will now need to draft a sublease agreement.
You will need to negotiate key clauses like rent terms, property use, termination and maintenance responsibilities with the subtenant.
You will need to collect a security deposit from the subtenant, this is usually the same amount that you paid, otherwise, it will be based on the monthly rent for the room the subtenant rents. Your landlord should protect the subtenant’s deposit in a registered deposit protection scheme.
It’s worth compiling evidence of the property’s condition before the new lease begins so that you don’t get blamed for damage that you didn’t cause.
For repairs, as the lead tenant, it will be your responsibility to organise this with the landlord.
The agreement will also set out how much rent is due and when it should be paid. You should also specify accepted payment methods.
You will need to include your and the subtenant's personal details, including full names and roles in the contract. Make sure the full names are correct to ensure the contract is legally binding. You’ll also need to include the address of the property.
Obtaining landlord consent
Subleasing a property without the express permission of the landlord is illegal. You might have already received verbal permission from your landlord that subleasing your property is okay, however legally you still require written consent from your landlord before entering into a sublease.
A landlord has the right to refuse you a sublease. However, if it is allowed in the lease agreement, they must give a valid reason and cannot unreasonably refuse the request.
Valid reasons to refuse a sublease include:
The sublease would make the home overcrowded
The subtenant wants to charge too much rent
If subleasing is outlawed in the lease the landlord can refuse any request to sublet a property. On the other hand, if there is no mention of subleasing in the tenancy agreement, the landlord can grant or deny the right to sublet at their discretion.
In fixed term tenancies, a tenant can sublet their property without their landlord’s permission if there is no mention of subletting in the tenancy agreement.
If a landlord decides they don’t want a tenant to sublet a property they can get a court order to end the tenancy and evict the tenant.
Signing the agreement
If all other steps have gone smoothly, the final step in drafting a sublease agreement is all parties signing the agreement.
The formalities of signing a sublease agreement, include the importance of all parties signing the contract with their full legal names and keeping records of the agreement. The contract should also be dated.