P403, Instead of sublet, do this...
In this post, I would like to share with you a true story happened recently. It touches the topic of sublet. Via this story, I will explore the following
01). Why sublet is to be avoided
02). What is a better alternative
03). Lesson learned from this case.
Let’s get right into it.
Back to May 2020, a young couple in their late 20s applied a townhouse from us. They are both engineers, witty, polite, with excellent income, great credits, fantastic references from previous landlords.
In short, they are great tenants any landlord can hope for. They loved the home and we signed in 1 year lease. Things went great after till we receive an email from them in September.
What had happened was due to the economic downturn, they have to relocate. The amazing part of this couple was that they took the ownership of the issue outright – they appreciated how we have treated them in the past (it feels great when your tenants feedbacked in this way!), and proposed the sublet option to have someone taking over the lease from them, and they were fully aware that they shall be responsible for the lease/rents till it is rented out.
I was duly impressed with the maturity demonstrated by the young engineer couple, and the thoughtful initiative they proposed – The sublet. Via the link here, you will find a bit more about the sublet. In essence, it works like this –
the tenants can sublet their home with the writing consent from the landlord.
landlord can not refuse without a good reason (No one knows what “good” really mean)
the tenant who sublets the house is still responsible for the rents.
As a seasoned landlord, I am not a big fan of the sublet. This is because at the first glimpse, it seems a quick and easy fix, but in the long run, this approach can surreptitiously cause many issues that could be troublesome to both landlord and the main/original tenants. I will lead you through these pitfalls in the next section.
- Rush mode – The nature of the sublet can easily lead the tenant’s screening and qualifying process into a “rush” mode, because both landlords and the current tenants are “desperate” to get someone in. It is outright wrong attitude that can only ask for trouble.
- Grey area – As per Alberta government website, besides very limited information on sublet, you are encouraged to seek for “legal advice”. And in reality, this leaves a large room for confusions and issues. Not long, the good will started to help each other could turn into resentments and even disputes if things are not going well as planned, which could be likely the case when everyone is anxious to get this done within a pressured time
- Hard for landlord to manage- With an extra layer of the “sub-lease” stuck into the middle, it is a nightmare to manage if any one of the tenants are running into issues. The goose chases are common scenes.
- Bad for the original tenants – As they are still being hold responsible if the sublet-tenants decide not stop paying rents, or ran into any kinds of issues.
Instead of sublet, the so-called “re-renting” option is a much better option. Here is how it works.
First of all, way before any of this happens, we need to have the originally lease clearly stated that there is no sublet option available, instead, we offer what we called “re-renting” option. Here is how it works.
- Apply with good reason
- Review and approval
- Turn on our auto renting system. (it is a automated work flow we have developed to market the houses, screen the prospects, book viewings, qualify the applicant and sign off lease all done with a few simple clicks in our office).
- The current tenants only need to show the home if chosen, or our agents show it for them.
- Once rented, their lease ends and we start with the new tenants fresh.
- If not rented, we continue to rent and they can either leave with the lease still valid or go into so called “frustration agreement”.
We went over the process with the couple, they were very cooperative. Long story short, this house was rented out in less than 10 days. New lease signed, and everyone moved in, out and on.
- Don’t be fooled by the appearance – sublet seems to be an easy quick way on the surface, but it is a kick-the-can-down the road approach with many downsides. Avoid it whenever you can
- Instead of approving sublet, provide the opportunity for tenant to assist and rent this property out. They are way more appreciated, motivated and willing to work for the common goal instead of against each other.
- Share what we all care – The whole story also reveals a key principle in residential real estate renting – a strong relationship between tenants and landlords based on the common ground to “share the homes that we all care” will make everyone better off, regardless the economy down or up turns.