Picture this: you’ve finally completed the move-in process for a new resident. After rifling through unreliable and inconsiderate candidates, you were happy to offer a leasing agreement to this squeaky-clean resident who passed your background check with flying colors and impressed you during the meet and greet. A few weeks go by only for you to find out that your perfect resident has leased their apartment to an individual with poor taste in loud rap music and an apparent interest in late-night tap dancing.
Subleasing: you know you love it.
Letting your residents rent out their space to a third party can be a pain in the butt for a bunch of reasons. Subleasing can make your life—and the lives of your other residents—a freaking nightmare. But hey, every once in a while, this unconventional renting style could actually work to your advantage.
You guessed it. It’s time for a pros and cons list.
- Fewer Vacancies: Life happens. Jobs move, people get married, and statuses change. Sometimes, residents have legit reasons as to why they can’t stay put. If a resident has to leave, the ball’s in your court and you have one of two plays to make: either leave the unit empty and start from scratch or allow for a sublease. As a gentle reminder, recall that an empty unit in your complex generates approximately $0/month.
- Residents Do the Searching: Subleasing can not only fill your vacancies but can do so with little effort on your part. Because the leaving resident in the subleasing equation probably isn’t too keen on dealing with a broken lease on their record, they’re as eager as you are to put their roof over someone’s head. “With subleasing, leasing agents don’t have to actively lease,” stated Josh Seifferlein, Director of Information Technology at a property technology startup, “effectively, the residents do their job for them.”
- Appear More Flexible: Just because a resident is moving out and looking to sublease does not mean your role in upholding a positive customer service experience is over. As previously mentioned, leaving residents often have a respectable reason for their move. The last thing they need in the midst of a stressful life event is a snotty attitude from their property management staff. Consider your options. As your resident is leaving you can:
- Kick a guy while he’s down and give him a hefty fine to cover your losses from a broken lease, thus giving him reason to trash talk your property to his buddies and start a chain reaction of crappy PR…Or
- Charge a small subleasing fee, absorb some additional paperwork, and leave the resident feeling understood and more likely to refer your property to others.
While you may have to deal with some more boring contract formalities, your resident now has an easier move, the subleaser has a place to stay, and your property comes off as pleasant and considerate.
- Inconsistent Screening: Unfortunately, subleasing generally entails a loss of control over the general leasing process on your part. Your beloved screening process probably loses priority to your original resident’s need for a replacement. If left to their own devices, a resident’s subletter could become the new bane of your existence. Short-term leasers in particular enjoy dismissing neighborly etiquette and rent reliability.
- Angry Residents: The only thing more expensive that one empty unit is a handful of renters storming out in response to their hatred for the sucky new subletter. This ties directly in with the whole screening process issue. Again, short term subletters hold a special place in the hearts of pre-existing residents. In talking with various leasing agents, David Luna, field technician at a property technology company, discovered that residents often get more annoyed than management. “Their complaints being that the people coming in temporarily were not treating the facilities as they would if they were the ones under contract.”
- Poor Communication with Original Resident: Depending on the format of a sublease, your original resident may maintain responsibility for their unit. What does this mean? Similar to the uber-efficient communication methods of middle schoolers in a recess setting, you and your new subletter now get to indirectly hash things out through the original resident. Funneling all requests, complaints, and payment-related issues through the original renter is both obnoxiously tedious and unreliable. If your original resident goes rogue for whatever reason, the war between you and your subleaser is now forced into a stalemate.
You know the risks and you see the benefits… and the obvious choice, well, isn’t super obvious. Subleasing does offer some pretty attractive advantages. You can’t, however, ignore the downsides. Perhaps it would help to know that there are some actual steps you can take to get a grip on these irritating drawbacks. These steps, of course, all originate from describing subleasing terms in the initial leasing agreement. In that handy-dandy subletting clause:
- Require Management Consent: This is as basic as it gets. Make it known that any and all subleasings must have your acknowledgement and approval.
- Prohibit Short Term Subleasing: You don’t have to deal with Vrbo and Airbnb if you don’t want to.
- Set Screening Requirements: Reiterate that subletters are not exempt from screening. This could be as simple as restating your screening policy for regular residents.
- Outline Rent Liability: To avoid gray areas, clearly state rent payment responsibilities and any additional steps required if rent were not paid.
- Describe Sublease Standards: As you would with traditional residents, set basic subleasing arrangements. This includes expressing who is subleasing, when they will sublease, cleaning expectations, etc.
The ball’s in your court
Deciding to prohibit or allow subleasing is a choice you eventually have to make for your property. Obviously, one could slap together an argument for either decision. That being said, after understanding the annoyances, you have it in your power to create a subleasing clause that can protect you from a fair number of the loud-music-loving tap-dancing-at-midnight residents we discussed earlier.