Many landlords are familiar with the term subleasing (or subletting), but few actually understand the full implications. Subleasing involves a primary tenant renting out their space to another tenant. There have been many horror stories circulating in recent years about tenants performing this practice without the knowledge of the landlord, which is considered illegal.
However, there are times when subleasing is done in a legal manner, with the approval of the landlord. It’s more common than one might think, but the circumstances tend to be the determining factor. Here’s everything there is to know about subleasing, especially if you’re a landlord with property to rent.
SUBLEASING VS. ASSIGNMENT
The terms “subleasing” and “assignment” may appear similar, but there are some differences between the two. Subleasing involves a secondary tenant paying rent directly to the primary tenant, or the landlord, where the primary tenant who is on the lease is held responsible for payments made on time, as well as the state of the property.
By contrast, an assignment involves a new tenant taking over the existing tenant’s lease, which is essentially a hand-off. The secondary tenant becomes the primary tenant, while the previous primary tenant walks away from the contract with no responsibilities to the property.
SHORT TERM VS. LONG TERM SUBLEASING
Subleasing can be short term or long term, depending on the situation. Tenants may wish to enter into a shirt term subleasing for a variety of reasons such as traveling, or migrating to a different locale during a particular season. While they may still be technically on the hook when it comes to paying rent and maintaining the property, landlords may allow these tenants to sublease the property for a short period of time to cover rental costs.
By contrast, long term subleasing is done with the intention of eventually passing off the property rental contract to a new tenant. Though similar to the aforementioned assignment, a long term sublease may not kick in right away. Secondary tenants may rent the property for a while before the full exchange is done, and the primary tenant is able to walk away.
HOW TO SUBLEASE
Landlords should always be aware of subleasing, regardless of the situation, or if otherwise stated in a contract. Landlords should always be aware of who is residing in their property, and what their background is. Property management companies know full well how tricky this process can be. The wrong subtenant can create a nightmare scenario for a landlord, which is why any and all subleasing propositions should go through official channels. Background checks should be done, including credit histories to prevent delinquent payments.
In the end, the primary tenant is still liable for paying the rent, and guaranteeing the upkeep and maintenance of the property. However, costly disputes can still occur which means due diligence should be practiced before any subtenant steps foot onto your property.
ADHERE TO ALL LAWS
Various provinces in Canada have specific rules regarding subleasing, and it would serve landlords well to familiarize themselves with all the details before choosing this option. A list of subleasing laws for the province of Ontario can be found here.
Understanding these laws will help you draft the appropriate contract that is legally binding, and leaves no room for misunderstanding. Or- allow your property management company to take care of this stage for you, so that you can be sure you haven’t missed anything due to the complex legal language in provincial law.
If you’re comfortable with your tenant subleasing your property, then be sure to follow the above advice to make sure you’ve covered all your bases. Failure to do so can lead to sticky situations that can be hard to resolve, especially given how difficult it can be to remove delinquent tenants from a property.
For ultimate peace of mind ,when subleasing, consider hiring a property management company that knows the ins and outs, and how to deal with any complex problems that may arise. This will grant you extra confidence when subleasing. Contact RentCore today for more information on subleasing, and whether you should allow your current tenant to pursue it.
Realtors hold themselves to a very high professional and ethical standard, and their business revolves around making clients happy, garnering a top notch reputation, and providing the best service they can. However, as a realtor’s success grows, so too does the extent of their responsibility to manage multiple properties and clients at any given time.
Given the multi-tasking challenges, realtors may find themselves needing some help in order to maintain their client portfolio, while expanding their business opportunities. Property management companies can take on a portion of the workload and free up the realtors’ time to focus on the tasks that are most rewarding. Here’s a few reasons why the partnership between realtors and property management companies is a sound strategic fit, and how you can take advantage of the benefits.
FINDING THE RIGHT TENANTS
Many clients opt to find tenants to rent their properties all on their own, but there are an inherent set of risks involved. First, it’s a time-consuming process, and inexperienced landlords may inadvertently miss key details related to background and financial checks, as well as the qualitative data that comes from years of experience interviewing tenants. Normally, realtors would handle this task for clients, but those same realtors can also utilize a property management company to handle those tasks.
This is especially advantageous for realtors with clients who own multiple properties, as the need for tenant screening would be required on a regular basis. Realtors know full well how detailed-oriented and precise the tenant selection process can be, and it’s far better for them to rely on a property management company to handle this time-consuming task, while they keep a bird’s eye view on how things are progressing.
KEEPING UP TO DATE WITH LAWS
Realtors understand the legalities of renting out properties, and these can change from time to time at the local or municipal level. Still, it can be difficult to keep up with all of the requirements necessary for each individual property, including permits, licenses, safety and health standards, electrical codes, and insurance coverage. By allowing a property management company to step in and assist, realtors can further reduce the time spent on these issues, freeing them up to pursue more business, or a better work/life balance. Bear in mind that many of these things need to be re-examined when a new tenant rents out a property, and it can be very time-consuming for a realtor managing a host of individual properties.
MANAGING MAINTENANCE AND REPAIRS
Realtors need to be aware of the need for regular maintenance, suite inspections and occasional repairs to a property, especially if a tenant is living there. These issues need to be dealt with quickly to avoid potential legal issues or breaches of contract. In the midst of a busy period, they can have a difficult time freeing themselves up to manage and oversee the process. Property management companies can act as liaisons between contractors, realtors and tenants, taking the guesswork out of the equation, while making sure everything is running smoothly. That way, realtors can focus on other tasks while enjoying the peace of mind of knowing that a property management company is on the job 24/7 . Since repairs and maintenance can be quite complex depending on the issue, it can be very difficult to switch gears and regain focus.
COLLECTING RENT & ARREARS
Realtors know how to deal with tenants, but what happens when one becomes delinquent and falls behind on payments? It’s one thing to simply collect monthly rent, but it’s quite another to deal with those who have refused to pay altogether. Property management companies have the skills to handle these situations so that you don’t have to. The last thing realtors want is to chase after delinquent payments, and it could become a complex legal battle in relatively short order, which is why it’s better to allow a focused team to handle it. That way, there’s no risk of missing a key detail due to distraction, which can be problematic in the long run.
Realtors would do well to consider working with a property management company, as the benefits are plenty. By offloading a lot of the routine work, realtors can free up their time to focus more on doing what they do best.
For more information on how you can benefit from working with a property management company, please contact us today!