Lease Tips: Assignments, Sublets, and Everything In Between

by Chris on August 15, 2016

Built into nearly every tenancy agreement is a paragraph that deals with assignments and sublets. It’s important for landlords to understand the impact of these provisions when handling tenant issues.

Landlord Responsibilities: Assignments, Sublets, Early Terminations

If a tenant needs to leave the rental property early or temporarily, there are any number of possible outcomes. A landlord may:

Have a waiting list of available tenants. In that case, the landlord could allow an early termination, and enter into a new lease with a new tenant.

tenant screeningAgree to allow the exiting tenant to find a replacement tenant. Assuming the current tenant is responsible, he or she has strong incentive to find another person who can jump in and pay the rent. But be careful: the exiting tenant may have created too rosy a picture. The new tenant will need to undergo an independent tenant background check. The old lease will be terminated, the old tenant is off the hook, and a new lease is drawn up with the new tenant.

Allow the tenant to sublet the property. A sublet is a specific arrangement where the original tenant brings in a surrogate who will live in the property and pay the rent, typically to the tenant. The tenant will in turn continue to pay the landlord, and remains liable for other provisions in the lease. Common examples where a tenant may want to sublet are long-term rentals were the tenant plans to return, and replacing an exiting roommate.

As a general rule, the landlord has the right to approve the subtenant. It’s important to include that language in the tenancy agreement. The best way to vet the new subtenant is to ask for a rental application and run a tenant background check.

Assuming all goes well with the sublet, the landlord may not be affected. The subtenant has few legal rights. In fact, the British Columbia Residential Tenancy Branch just updated its guidelines to clarify that subtenants do not have standing to ask for dispute resolution with the RTB. Their only recourse is through the original tenant.

However, as a practical matter, the landlord may suffer from a sublet, especially where there is a disgruntled subtenant, or a policy of revolving roommates. It’s imperative to know who is living in the rental property, and whether there are any safety or health concerns. For that reason, it may be cleaner for the landlord to simply terminate the original lease, and enter into a new lease agreement with the proposed subtenant. That allows the landlord more control over what is happening at the property.

A increasingly popular option for today’s tenants in overnight sublets through vacation rental websites. These sublets may be restricted by local law, or may violate other provisions in the lease concerning residential use of the property. There is also an obvious risk due to the lack of tenant screening. There have been a number of reports of subtenants using false identities, stealing the tenant’s identity, or causing significant property damage before leaving the country. Where the subtenant has access to common areas or creates disturbances, neighbouring tenants may complain or even threaten to break their leases.

In Quebec, the Régie du logement has ruled that tenants must seek their landlord’s approval before advertising for vacation sublets. However, the landlord can’t use their tenant’s newfound profits to raise rent. At the same time, the tenant is not allowed to overcharge subtenants for nightly visits.

Allow the tenant to assign the tenancy agreement. Where a sublet is often a short-term arrangement, assignment generally is more permanent. All of the tenant rights and responsibilities are transferred to another person. This usually includes the responsibility to pay rent directly to the landlord in whatever fashion is stated in the lease. As with a sublet, in an assignment, the original tenant is still a responsible party to the lease.

The advantage of an assignment is having what is loosely equivalent to a lease guarantee, where the landlord deals directly with the new tenant, but still could pursue the old tenant in the event of default.

However, the disadvantage of the assignment is that the original tenant is the one who goes over the rules and responsibilities with the new tenant. The landlord may become separated from the process.

It may not be possible — or practical — to prohibit sublets, assignments  or early terminations altogether. There is a duty on the part of a landlord to mitigate damages if a tenant leaves early. The landlord must take reasonable action to find a replacement tenant as soon as possible, regardless of the stated term in the lease or the reason that the tenant is leaving. The exiting tenant likely will be liable only for the time the property is not rented.

In addition to the duty to mitigate damages and find a replacement tenant, if the landlord denies an early termination request, a panicked tenant might abandon the property. In that case, it may not be clear whether the original lease has been terminated, and recovering the property may require more time and possibly a court order.

A landlord gains no advantage by refusing a request for early termination, or failing to approve a replacement tenant.The best strategy in the situation may be to stay in control of the tenant screening process and to have legal rights over the person who is occupying the rental property.

If you are unclear about issues concerning your tenancy agreement or how to handle tenant issues, consult with your legal counsel.

This post is provided by Tenant Verification Service, Inc., helping landlords reduce the risks of renting with fraud prevention tools that include Tenant Screening, Tenant Background Checks, (U.S. and Canada), as well as Criminal Background Checks, and Eviction Reports (U.S. only).

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Disclaimer: The information provided in this post in not intended to be construed as legal advice, nor should it be considered a substitute for obtaining individual legal counsel or consulting your local, state, federal or provincial tenancy laws.

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