You`re getting married and your small apartment just won`t accommodate the his-and-hers combination of two households.
Or, you`ve been promoted to a new job in another city and your lease still has six months to go.
In either case, you won`t be able to fulfill the term of the lease on your apartment. So what do you do?
Subleasing may sound like the perfect solution, but it`s not the only one. Renters may also want to look into reletting their apartment.
Many standardized lease agreements prohibit a tenant from subleasing or assigning lease rights to someone else, said Dan Sarrett, president of the Real Estate Education Co., which specializes in education for real estate professionals.
Leases frequently stipulate that only the original tenant can occupy the space and that occupancy by anyone else constitutes a default of the lease, Sarrett said.
More than semantics
”What most people call subleasing today is really a lease assignment,”
Sarrett said. ”Most people use the terms `subleasing` and `lease assignment` interchangeably, but there is a difference, and that difference spells out the legal protection for the tenants involved.”
In subleasing, the tenant transfers his rights to occupy the apartment to another tenant for a period of time. The first tenant generally must find the subtenant on his or her own and remains responsible for paying the rent and paying for any damages to the apartment until the lease is up.
For example, tenants at the Seneca apartments, 200 E. Chestnut St., are required to tell the apartment management of their plans to sublet. The tenants then are responsible for finding a subtenant.
”We`re not required to rerent the apartment,” said Shirley Cress, leasing director at the Seneca. ”The tenants advertise and get applications from us for the new tenant. We don`t enter the picture until it`s time for a credit report to be filled out by the new applicant. We would then reject or approve (the applicant).”
This is a ”true sublet” arrangement, where the lease stays in the original tenant`s name and the second person lives in the apartment. ”The subtenant pays us directly or pays the tenant, who then pays us,” Cress said. ”Our only concern is that the rent comes in steadily.”
In a ”lease assignment,” the tenant assigns a new tenant the unexpired term of the lease, Sarrett said. This means the original tenant is no longer responsible for the apartment; instead, the new tenant, or assignee, is.
The Seneca offers tenants a third option; it will ”relet” the apartment for a tenant and subtenant, Cress said. ”The original tenant`s name is off the lease and (that tenant) is relieved of any obligation,” Cress said, and a new lease is written for the new tenant. The arrangement sometimes involves a fee for the departing tenant or the one moving in, to cover the necessary paperwork and decorating of the apartment.
But the incoming tenant may prefer a sublet, in which the rent stays the same as the monthly rent that was paid by the original tenant, Cress said. In reletting, management can increase the rent, she says, because ”we`re starting over from scratch and are not held by the terms of the previous agreement.”
Top choices
Sarrett said reletting and lease assignment, which are similar in practice, are the best options for the original tenant who is unable to fulfill his or her lease obligations.
”The original tenant is relieved of his responsibility, which is the whole reason why he`s looking for someone to take his apartment and fulfill the rest of his lease,” Sarrett said. ”This way, a new individual steps into your shoes.”
In Chicago, the Residential Landlord and Tenants Ordinance sets subleasing rules for landlords and tenants, holding the original tenant responsible for the rent for the term of the lease unless the apartment is rerented.
In some cases, those rules can cost the original tenant some money.
”If the landlord rents for less than what`s due (under the original lease), then the tenant must make up the difference,” said attorney Barry Kahan, who heads the Chicago Bar Association`s subcommittee on leasing and ownership management. ”In this situation, when a landlord accepts a tenant at a lesser rate, then the landlord bears the responsibility for proving that the lesser rent was called for because of market conditions.”
But if the landlord manages to rent the apartment at a higher rate than under the original lease, then the original tenant would receive the difference, Kahan said, adding, ”This seldom happens.”
”In subleasing situations, tenants need to know that they remain liable for all costs or any damages to the apartment, unless they get a release from the landlord,” Kahan said. ”Often, the tenant doesn`t understand this. They think because they got someone to sublease the apartment they are off the hook, but it depends on the new agreement the original tenant has reached with the landlord.”
Complications
The triangle-landlord, tenant and subtenant-can get even trickier. Because a subtenancy continues the original tenancy, the original tenant remains liable to the landlord and the subtenant is liable to the tenant, Kahan said.
If the landlord does not agree to the sublease but the tenant goes ahead and forms an agreement with a subtenant, Kahan said, the subtenant can lose possession of the apartment and the landlord can take legal action against the original tenant.
Still, even if a lease prohibits subletting, the tenant still may be able to negotiate new terms with the landlord, Kahan said.
For example, tenants at the Belden Stratford apartments, 2300 N. Lincoln Park West, are allowed to sublet their apartments under certain circumstances, but management says it is also willing to discuss other arrangements, such as reletting or lease assignment.
”They can sublet if they have a job change because we have job transfer clauses written in as a rider to the lease,” said Janice Greenberg, manager at the Belden Stratford. ”This is an option offered to tenants when they sign the lease. It`s something we`ve had in place for almost 25 years. We attract residents who are in an upper income level and who are subject to the dictate of their job.”
Renters can have many reasons for having to break a lease-perhaps a job transfer, marriage, or a change in financial circumstances where the person can`t afford to live in a particular apartment anymore, Kahan said. ”A landlord`s willingness to allow subleasing depends on market conditions and the popularity of the building. If they have people on a waiting list to get in, you have a better chance of negotiating with the landlord.”
Sarrett suggests keeping the landlord`s perspective in mind when asking permission to sublet or assign the lease. ”As long as the landlords get another tenant and are not losing cash because of your change of plans,” he says, ”then they will be happy to let you off the hook.”
