Subletting vs Subleasing: Which Option is Right for You?

Whether you're a tenant pursuing flexible arrangements or a landlord enabling adjusted agreements, gain clarity on subletting versus subleasing here.

By
Nichole Stohler
|
Last Updated
December 7, 2023
Subletting vs Subleasing: Which Option is Right for You?

Subletting or subleasing your place and unsure which route to take or what the differences between the two even are? You’re not alone — many renters and landlords find themselves confused about these terms when considering rental arrangements.

This article covers the differences between subletting and subleasing, helping you understand the distinctions and make the right choice for your situation. For both landlords and tenants, gaining clarity on these rental options helps create a smooth and hassle-free rental experience.

We'll provide the core information about differences, laws, and decision criteria you need to evaluate when making your rental decision. By understanding the distinctions of subletting vs. subleasing, you'll be able to confidently pursue the best fit.

Sublet vs. sublease agreement

When a tenant seeks a temporary rental arrangement, it typically falls into one of two categories: a sublease or a sublet. In both cases, the new occupant is known as a subtenant. However, there are major differences between the two, especially when it comes to the original tenant’s role and how much of the lease responsibility changes hands.

What is a sublet?

Let's say you have a year-long lease on an apartment, but you need to leave town for 3 months for a work project. You don't want to break your lease, but you also don't want to pay rent for an empty apartment while you're gone. To avoid either of these less-than-ideal outcomes, you decide to sublet your apartment. Subletting means that you, the original tenant, find another person to take over your lease and live in the rental unit temporarily.

A sublet involves the creation of an entirely new contractual relationship between the landlord and the subtenant. The landlord terminates the original lease agreement with you, the tenant who initiated the sublet, after which the subtenant will assume all the responsibilities associated with the property for the duration of the sublet.

What is a sublease?

A sublease happens when an existing tenant decides to lease their rental property to another person, known as the subtenant.

In this scenario, let's say you currently rent a 2-bedroom apartment on a year-long lease for $1,500 per month. However, you recently received a pay cut, making it hard to afford the full monthly rent. Since you can't afford the $1,500 rent on your own, you decide to sublease the extra bedroom.

You and the sublessee sign a sublease agreement covering details like monthly rent, duration, utilities, etc. However, even though you subleased a bedroom, you'll remain the sole name on the original lease. You are still fully responsible for fulfilling all lease terms with the landlord. If your new subtenant violates lease policies, you must handle it yourself.

Differences between a sublet and a sublease

While sublet and sublease agreements share similarities, three key areas of distinction exist:

1. Contact with the landlord

One key difference between subletting and subleasing lies in the nature of the landlord-tenant relationship.

  • Sublet: The new tenant establishes direct contact with the landlord and signs a completely new lease agreement with the property owner. It means that the subtenant becomes a tenant in their own right, assuming all the rights and responsibilities outlined in the new lease.
  • Sublease: The new tenant does not directly interact with the landlord.  Instead, the sublessee enters into a contractual relationship with the original tenant, who remains the primary tenant in the eyes of the landlord.

2. Lease termination and rent payments

Another significant difference between subletting and subleasing relates to the original lease agreement and rent payments.

  • Sublet: The property owner typically terminates the original lease between the tenant and themselves, and the subtenant makes rent payments directly to the property owner. The subtenant then assumes all the financial obligations associated with the property, including paying rent, utilities, and any additional fees specified in the new lease.
  • Sublease: The original lease remains in effect, and the original tenant keeps paying rent to the landlord. In this case, the sublessee makes rent payments to the original tenant. It's important to note that the original tenant is responsible for fulfilling the lease terms with the landlord, including rent payments and property maintenance.

3. Responsibility for property and damages

Responsibility for the rental property and any damages may occur is another factor that sets subletting apart from subleasing.

  • Sublet: The new tenant assumes full responsibility for the property and any damages caused during their occupancy. They are liable for repairing or compensating for any harm they or their guests may cause.
  • Sublease: The original tenant still holds primary responsibility for the rental property. It includes any damages caused by the sublessee during their occupancy. The original tenant remains accountable for addressing any issues and may be held financially responsible for any necessary repairs.

Pros and cons of subletting and subleasing

When weighing subletting against subleasing, both tenants and landlords should evaluate certain tradeoffs that can impact the rental experience. Areas to evaluate between the options include:

Subletting

For tenants, subletting offers flexibility if you need to move out temporarily, reduces expenses if you can't afford the full rent, and protects your credit score, since you won't have to worry about accumulated debts incurred by costs associated with breaking the lease.

Drawbacks include the difficulty of finding a suitable subletter, the risk of a tenant being late on rent, and the potential for property damage.

For landlords, subletting provides continued rental income and avoids vacancies. However, it can negatively impact property value if the risk of property damage increases with the turnover of tenants.

Subleasing

Benefits for tenants include additional income from subletters, flexibility to move without breaking a lease, and avoiding hassles of getting a new lease.

On the flip side, if you struggle to find a subletter, you might have to reduce the rent to make the prospect more appealing, lowering your rental income as a result. You also maintain an ongoing responsibility for rent and damages as the original tenant.

Landlords benefit from continuous rental income, avoided vacancies, and potential for subletters to turn into long-term tenants.

Drawbacks include uncertainty about subtenants' qualifications and dependence on the original tenant screening subletters.

What terms are included in a sublet and sublease agreement?

Sublet and sublease agreements contain key legal terms defining the rental contract between a tenant and a subtenant. It is important for both parties to understand these terms and conditions.

While specific terms may vary, there are typical clauses common to both types of agreements:

  • Parties involved.
  • Property description and address.
  • Length of the rental agreement.
  • Cost of rent.
  • Fees and security deposits.
  • Included costs.
  • Restricted activities.
  • Consent from the landlord.

Situations where a sublet or sublease is necessary

Subletting or subleasing can be beneficial when your living situation changes before your lease ends in terms of affordability, desired property size, or due to a need to relocate. Some typical situations include:

  • You don’t want to break the lease: If you need to move out before your lease term ends but don't want to face penalties for breaking the lease, subletting or subleasing can be a viable option. It allows you to avoid lease termination fees and maintain a positive relationship with your landlord by finding someone to occupy the rental unit and fulfill the lease terms.
  • Your rent is too high: If you have signed a lease you can no longer afford, subletting or subleasing can ease the financial burden. You can reduce your costs by finding a subtenant who pays part of the rent while you continue occupying the property.
  • The property is too big: If you lease property larger than your needs, subletting or subleasing can save on expenses. You can find a subtenant to share the unused space and efficiently utilize the full area.
  • You need more space: If your rental no longer fits your requirements, subletting lets you move while a subtenant takes over the existing lease. It transitions you to a better-suited living space without breaking your current lease.

Understanding the difference between a sublet and sublease

Understanding the differences between subletting and subleasing is key for tenants and landlords pursuing flexible rental arrangements that align with their priorities.

While the terminology may seem similar, the differences between the two around financial obligations, property responsibilities, and legal relationships are important to make.

Choosing between subletting and subleasing hinges on individual circumstances, rental agreements, and the willingness of all parties to communicate openly while adhering to legal obligations.

Whether you're a renter seeking cost offsets or a property owner enabling adapted leases, knowing the differences helps you navigate smoother transitions and prevent confusing terms from becoming pitfalls.

Subletting vs subleasing FAQs

Can landlords increase the rent during a sublease or sublet agreement?

The ability of landlords to increase rent during a sublet or sublease can depend on the lease agreement and local laws. In general, landlords may have the right to raise rent at their discretion, but some jurisdictions impose limitations or prohibitions on rent increases during subletting or subleasing.

How does the approval process for subletting or subleasing typically work with landlords?

The approval process for subletting or subleasing typically involves several steps. The tenant interested in subletting or subleasing should notify the landlord in writing, providing details about the proposed arrangement. The landlord then reviews the request, often considering factors such as the potential subtenant's creditworthiness and rental history, before granting or denying approval.

Nichole Stohler

Nichole co-founded Gateway Private Equity Group, with a history of investments in single-family and multi-family properties, and now a specialization in hotel real estate investments. She is also the creator of NicsGuide.com, a blog dedicated to real estate investing.

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