What is a Sublease Agreement?
As the name implies, a sublease agreement is a contract that describes the terms and conditions under which a property owner (or tenant) will rent out part of their rental property to a subtenant. The nature of this arrangement – and whether it is legally allowed depending on your lease – can be a bit complex to understand.
Below, we’ll examine what a sublease agreement is in greater detail, as well as some information on how subleasing generally works.
A sublease agreement serves a few key purposes for both parties. For the sublessor, either a property owner or a tenant renting an apartment, it allows them to find a tenant for any unoccupied units they have. For subtenants, it provides a fair bit of protection while finding a temporary place to live.
In New Jersey law, a sublease agreement is legally binding. That means if either party fails to abide by the specifics in the contract, legal action can be pursued. While most agreements are amicably resolved, it’s good to know the contract is enforceable if necessary.
The New Jersey Department of Community Affairs advises all property owners to take their time and give careful thought to what they include in a sublease agreement. Since subleases are often a short-term stop gap , it’s also important to not go too extreme and make it an overly restrictive contract.
In terms of the specific requirements for a sublease agreement, NJ law does not define any specific forms or documents. Any written sublease agreement that both parties sign and agree to is legally binding, as long as it does not violate the New Jersey Anti-Eviction Act. This law prohibits certain lease termination arrangements such as the following:
The above listed restrictions and limitations put in place by the NJ Anti-Eviction Act are key points to mention because they prevent related legal issues for both owners and renters. If a property owner doesn’t include a provision that allows a property to be subleased, that doesn’t mean they can’t sublease – it only gives property owners grounds to file an eviction lawsuit.
For the tenant, it affords them two critical protections. First, if they breach the sublease agreement in any way, they can’t be evicted immediately (e.g. the sublessor cannot file for eviction until they’ve breached the agreement). Second, the tenant can’t be held responsible for any money the original tenant owes when they move out.
Essential Elements of a New Jersey Sublease Agreement
The following represent the terms typically found in a New Jersey sublease:
- Parties to the Sublease: A sublease agreement requires the parties to be named. The landlord and tenant to the original lease are listed along with the name of the subtenant. Rental agreements should attempt to state the address of the premises, just as landlords should always include their full legal name as well as the name of the property owner, if different.
- Lease Term: The term of the lease is essential. Whether one month, one year or some other time period, the written sublease should clearly state the term. Any attempt to create an oral agreement can result in litigation.
- Rental Payments: As with any lease agreement, the sublease should clearly state when rent is due and how it can be paid. This may be via check directly to the landlord, electronic payment to pay via an app such as Zelle or another method. A late payment policy should also be included.
- Description of the Property: The lay of the land will come into play with security deposits and disputes between sublessor and sublessee. The property address should be stated along with a description of any common areas, basement, garage or outside areas included. If the laundry room is shared with other tenants, for example, that should be stated.
- Landlord Approval: Depending on the underlying lease terms, the primary landlord should approve the sublease at the start to avoid the subtenant being evicted.
Legal Criteria for Subleasing in New Jersey
"Subletting," or subleasing, is when a tenant who is leasing an apartment to one person wants to rent part of that apartment to a third party. In other words, the tenant of the unit stays there as their permanent residence, but shares it temporarily with the sub-tenant. A sublet can be a good option when financing is getting tight or when someone is looking for a temporary roommate to help maintain the property.
As a review, the difference between an assignment and a sublet is when an assignment occurs, both the tenant and landlord are released from their respective lease obligations. In a sublet, however, the original tenant remains liable. Once the original tenant moves out and is no longer responsible for the sublet, a new one-year sublease is typically signed. The tenant must keep up with these payments as they remain the permanent tenant.
The New Jersey law (L. 1981, c. 226, s. 2) does not particularly define the duties and responsibilities involved in subletting. However, unless otherwise provided in the lease, the tenant may sublet with permission from the landlord who may not withhold without reason.
The Landlord/Tenant Act at section 46:8-2.4 sets forth the process for a tenant to request a sublease, as well as the process for the landlord’s response. The tenant must request in writing the right to sublet their apartment by sending the request via certified mail to the landlord.
If such request is granted by the landlord, a copy of the agreement for the sublease must be provided to the landlord within three days of execution. In addition, the landlord may charge a reasonable fee for these costs.
Section 10.1 of the New Jersey Apartment Lease covers subleases as well and provides a bit more detail as to the landlord’s right to approve or deny such subletting.
Advantages and Disadvantages of Subleasing
The practice of subleasing a lease in New Jersey has its advantages and disadvantages like anything else. Often, the person who is going to sublease gains. The tenant can pass through the provisions of the original lease as part of its sublease to the subtenant and can often receive a larger sum of money from the subtenant as compared to their lease obligation. In this way, the provisions of the lease can be passed onto the landlord through enforcement of the sublease, and the landlord will be deemed to have virtually approved of the sublease.
On the downside, if anyone defaults on paying anything under the lease or sublease, the original tenant may remain on the hook for whatever is not paid under an original lease. The subtenant might try to gain a better deal than what is provided under the lease and may try to bargain for a better deal. Original tenants should enter into subleases with someone they trust in order to minimize their liability under the lease.
A sublease also creates a complicated series of landlord-tenant relationship. There is no privity between the tenant and the subtenant. A landlord can only pursue the original tenant for damages and not the subtenant. The original tenant cannot pursue the subtenant without the approval of the landlord.
Sublease restrictions are not enforceable against the original tenant unless the subtenant is a successor tenant or unless the landlord provides express consent to enter into the sublease. The landlord can pursue the original tenant for damages if there is a breach of a sublease that was only entered into without express approval. Once again, although a landlord would not be a party to the sublease, it does not change the fact that the tenant is liable for all actions of the subtenant. Many leases contain preemptive notice requirements, such as a prohibition against entering a sublease or assignment without prior written consent of the landlord. These are often very carefully drafted and enforceable.
Under our current economy, many people start out their tenancy by subleasing. It is important that all tenants make sure they understand their sublease obligations just in case the worst happens.
Steps for Drafting a Sublease Agreement in New Jersey
An important aspect of creating a successful sublease agreement in NJ is getting it in writing as soon as possible. The document itself should cover the essential legal terms, some of which include:
When a subtenant is found, the sublessor must obtain all necessary consent from the landlord before they can legally be allowed to move in. Essential consent means getting permission from the landlord directly , but possibly also permission from your mortgage company if you live in a building with an HOA, paying a reasonable fee to apply for the sublet, and also making sure that the subtenant meets credit qualifications, if applicable. Finally, make sure a home inspection is completed beforehand, and double check to ensure that your lease has not expired before you allow your subtenant to move in.
How to Handle Sublease Agreement Disputes
Sublease disputes can arise over a wide range of issues, including failure to pay rent, property damage, or breaches of other sublease provisions. Like any other lease or contract, a sublease agreement that’s violated gives rise to certain legal rights, remedies, and even some defenses, depending on the circumstances.
Landlord obligations can be particularly problematic. If a landlord has failed to perform a legal obligation — such as maintaining the premises — you have a potential legal defense to a suit for eviction. In some cases, this could mean "known" problems that the landlord should have repaired, but didn’t, or periodic plumbing issues that aren’t dealt with on a recurring basis. The strict deadlines for notifying the landlord may catch you off-guard, however, so make sure you refer to the lease when problems are arising.
Procedural defenses could be an issue. For one thing, the landlord must follow certain procedures to start an eviction action in court, including giving you "proper" notice. Leaving you a note on the kitchen table may not be enough.
Finances can play a big role in sublease matters. It’s not unusual for a tenant to ask for "good faith" rent after they’ve failed to pay — for example, to catch up on their rent or be absolved from any late fees. NJ landlords and tenants may know their rights in these matters, but it’s worth consulting with an experienced real estate attorney to make sure you understand them.
The landlord has remedies for unpaid rent and expenses. If an original tenant entered a sublease that covers part of the unit, that tenant is still responsible for all rent and other expenses to the landlord — even if they pass that expense along to the subtenant. It is, however, on the landlord to apportion the amounts owed to each original tenant that is still on the lease.
If the original tenant leaves for a period of time (for example, military service or a long work assignment) and leaves behind a subtenant, they may still be legally obligated to continue paying rent for the entire length of the original lease term. If they cannot afford it, they may be willing or need to negotiate getting out of that agreement — or risk losing the money they already paid, to someone else.
The cost of going to court may discourage some landlords from taking sublease disputes to court — unless they’re ready to pay your legal costs, plus their own. When you’re dealing with the bigger issues, such as property or economic damages, this may be worth it. An attorney can help assess the situation.
Securing a Subtenant in New Jersey
Once the landlord has approved subleasing, the tenant can now begin finding a subtenant. First, the tenant must find someone who is financially qualified (or comparably financially qualified along with a co-signer). In this day and age, it is common that the roommate who caused the tenant to sublease is no longer financially able to assist in paying for the rent for the entire period of the sublease – so the tenant may have to find someone who is financially qualified on their own.
If you have read our blog post "Duties of a New Jersey Commercial Subtenant," you would have seen that obtaining a personal guaranty from the subtenant (in favor of the tenant), may protect the tenant in the event the subtenant does not pay the rent. Obviously, the tenant will want that protection.
Next, the tenant needs to screen the proposed subtenant. There are many websites which allow the sharing of rental payments in the interim between sublease periods . Such websites may be expensive but they will conduct background checks and other qualifications required by the landlord as well as perhaps come with an insurance policy which allows for the subtenant to pay rent directly to the landlord in the event of default. Taking such a service will give the tenant the assurance that the landlord will accept its use as meeting its requirements for finding a new tenant.
Finally, it is important for the tenant to interview the prospective tenant in person and make them fill out a sublease application. Even if the tenant decides to use a web-based service, it is always a good idea to do a random background check and do a credit and criminal check of the subtenant. Although the tenant could be sued for landlord’s damages for allowing the subtenant to move into the space without proper checking, the smarter tenant will always require the criminal and credit checks to protect their own position.