Subleases are only a small portion of the rental market. Many tenants will never be involved in subleasing. They haven’t given it any thought and probably don’t understand the process.
However, if you’re renting space and you have to relocate for one reason or another, you’ll have to decide how you are going to deal with your present lease. Legally, you’re locked in until that lease expires. If that won’t happen for several months and, if the apartment isn’t re-rented before that time, you can take a serious financial hit. Landlords, management firms and real estate attorneys agree that, in such cases, subleasing may be the most feasible alternative.
According to City of Chicago Residential Landlord and Tenant Ordinance, Section 5-12-120, landlords must accept any qualified substitute tenant. Though many suburbs don’t have specific tenant ordinances, Sam Levine, an attorney with Arnstein & Lehr of Chicago, says that all landlords have to accept a qualified sublease tenant, unless there is a clause in the original lease that says otherwise.
The first step in the process, of course, is to notify your landlord of your intentions. He or she is legally entitled to know that you’re planning to move and hope to sublease your unit. Real estate lawyers suggest that you submit a written notice to your landlord or management firm and retain a copy just in case there are any questions down the line.
After you’ve notified your landlord, you’ll have to locate another responsible tenant who likes your apartment and is willing to accept the terms of your existing lease or is willing to negotiate a new one. Locating a satisfactory replacement may be as easy as placing notices on public bulletin boards, such as those in your neighborhood supermarkets, book stores or health clubs. If that doesn’t work, you can try an advertisement in the classified section of metropolitan or community newspapers.
Building managers and landlords are usually more than willing to help you find a replacement. It’s in their best interest to help you locate somebody who’s satisfactory to both parties. Often, they’ll take over the entire process, including advertising and interviewing likely candidates. You may have to pay for any ads and for a background check on applicants, though. If you live in Chicago, that should be the limit of upfront costs to you. According to the landlord-tenant ordinance, landlords in the city cannot levy any additional fees, fines or penalties against a tenant who chooses to sublease.
If you conduct your own search, the most important thing to remember is that your proposed replacement must be qualified. In other words, in order to be acceptable, a sublease tenant must have sufficient income, a good credit record and have no previous history of evictions. As George Hausen of the Lawyers Committee for Better Housing puts it, “You have to think like a landlord.”
Once you’ve located a suitable replacement, the subleasing process can vary from situation to situation, depending on the policies of your property manager or on how far your landlord is willing to go to accommodate you.
If you want your security deposit back, your landlord must agree to negotiate a new lease. According to Hausen, the terms of a sublease depend on how a landlord agrees to handle it. “Strictly speaking, there is nothing in the tenant’s ordinance that requires a landlord to sign a new contract,” he said. If a new lease is signed, the former tenant’s deposit will be returned and the new tenant will be asked for a security deposit on the space.
If a new lease is not signed, the old contract remains in effect, the tenant who signed it remains responsible for the rent as well as the premises specified in the lease and the landlord retains the security deposit against damages until the lease terminates.
Real estate attorneys agree that a new lease is the best way to go, if it can be arranged. That way, the former tenant absolves himself or herself of all further responsibilities, but landlords don’t have to do it that way and not all of them will.
Kromelow & Tarre Inc., which manages rental properties in the suburbs as well as the city, works out subleases on a regular basis and reports little difficulty with the process.
“We work with clients in the suburbs just as we do in the city,” says Gary Kromelow, a principal at the firm. “We feel it’s our responsibility to help the relocating tenant any way we can.”
Russ LeBleu, a property manager for Kromelow & Tarre, says that the decision to negotiate a new lease or allow a replacement to assume the old one with option to renew depends on the circumstances. “If a tenant has been with us a number of years, we’re more amenable to terminating a lease and issuing a new one,” he says. “The length of time left on the existing lease is also a factor. If it’s only a month or two, it’s usually simpler to issue a new lease.”
Because management policies do vary, however, you’ll have to check with your own management people to find how they prefer to handle the sublease process.
Garth Doering, property manager for Village in the Park in Schaumburg and for other suburban properties, says that his firm charges a $300 fee (to cover the cost of credit and background checks) when a tenant must be replaced before his or her lease expires. The company refers to the process as a “relet” and it differs somewhat from a conventional sublease in that the new tenant pays a security deposit, signs a lease and takes possession of the apartment at the former rental rate until the expiration of the original lease. After that there is an option to renew for one year, which may include a rent increase. The former tenant is no longer involved. Doering says his firm won’t accept a relet, if the original lease will expire in three months or less.
Chris Dunat of Trammell Crow Residential, which manages properties throughout the western and northwestern suburbs, says her company expects the original tenant to locate an acceptable replacement for subleasing. Arrangements for such things as security deposits, rent differential and other details are made between tenant and the new applicant, who pays the regular application fee, covering a credit and reference check. There is no charge to the original tenant.
Whatever your landlord’s policies, you may not always be able to find a tenant willing to assume your lease at the rental you’re paying, even with your landlord’s help. In that case, Hausen says, you may have to compromise and settle for a lesser rent than that stipulated in your lease in order to re-rent your unit quickly. You’ll take a lesser hit that way, but you’ll still be locked into the rent specified in your lease and you’ll have to make up the difference until that lease expires.
Levine notes that there are no standard sublease forms because agreements between the primary tenant and the replacement tenant may vary considerably depending on the circumstances.
“A sublease can, in some cases, be risky for the primary tenant,” he warns, “because the primary tenant is still liable for the rent if the subtenant should default. The primary tenant also remains liable for any damages to the subleased unit.”
He suggests that, if there are doubts, the primary tenant should have a real estate lawyer check out the sublease before signing.
He also notes that tenants who must relocate might wish to consider other solutions, including a buyout through which the landlord agrees to terminate the lease on receipt of two or three months’ rent.
Short-term subleases are another scenario. Say, you’re planning to spend the summer months touring Europe. You don’t want to give up your apartment but you’d prefer to have somebody occupying it, and paying the rent, while you’re gone.
If you can locate a substitute tenant for that time, you’re entitled to sublease for a brief period, according to the real estate authorities, who say there’s nothing that specifies that a sublease has to be in effect for the remainder of lease. No changes will be made in the lease and you will still be the tenant of record with all attendant legal obligations, including the timely payment of your rent. Your security deposit will not be affected, unless your sublease tenant damages the property. However, even on a short-term sublease, you must let your landlord know of your plans.
“Even if the tenant is only subleasing for a month or so, we need to know about it,” Kromelow says. “We need to know who is living in our apartments. That can be important if there is an emergency.”
Kromelow adds that arrangements for payment on short-term subleases is up to the primary tenant. “However, it is usually simpler if he continues to make payments and lets the subtenant reimburse him,” he concludes, “because our computerized records may not indicate a subtenant and, if the apartment address and number are not on the check, we may have difficulty trying to determine where to apply it.”
