What is Assignment of Lease and How It Differs from Subletting
The assignment of lease (and rent) is a foggy topic that is often confused with subletting. Let's clear the air once and all right now. Learn the differences between a lease assignment and sublease so you can make the right choice.
What is Assignment of Lease? - The Important Basics
Let's begin by introducing the 3 players in a lease assignment - The landlord, the original tenant (assignor) and the new tenant (assignee).
The original tenant has an unexpired lease agreement with the landlord and he wants out. Since the original tenant can't just break the agreement and walk off, what he does is to get a new tenant to swap places... and take over all his rights and obligations for the remainder of the lease period.
So if the original tenant signs a 1 year commercial lease and the business goes bust after 8 months, the new tenant will be assigned a 4-month commercial lease (with the same terms and conditions as the original agreement).
Now here's the big catch: Even though the original tenant has handed over all his duties and obligations to the new tenant, he is not off the hook... unless the landlord agrees to release him from all liabilities. If the new tenant stirs up trouble, our dear original tenant will find himself in hot soup as well.
Of course, whether the original tenant is allowed to pull this assignment trick out of his hat is a whole new matter. Knowing for sure is actually simpler than most people think:
First, examine your local landlord tenant laws for any lease assignment rules. Most of the time, landlords are given the right to allow or disallow assignments but once in a while, the local law let tenants have the final say instead. If there's no mention of lease assignments in your law text, then your rental lease agreement shall dictate the terms.
Difference Between Lease Assignment and Subletting
When it comes to subletting vs assignment of lease, there's often a massive mix-up. Sometimes even real estate professional get it wrong by assuming them to be one and same thing. However if you dig deeper, you will find that the differences are not just numerous, but important as well.
Let's begin by dragging the landlord into the picture. An assignment of lease launches the new tenant into a direct relationship with the landlord - The landlord collects rent straight from the new tenant and deals with the new tenant directly on all lease issues. So in this case, the original tenant gets to take back seat and doesn't have to manage the new tenant actively.
On the other hand, there's no direct relationship between the landlord and new tenant (subtenant) in a sublease. Instead the original tenant plays mother goose and is responsible for collecting rent from the subtenant and making sure that he's following the lease rules. When you compare the two, a sublease is a lot more hands-on for the original tenant.
No matter which path you take, you will still want a good new tenant who pays the rent on time and follows the lease rules to the agreement. For the golden rules on screening tenants and running credit checks, Click here for our guide to running tenant credit checks.
When you have a lease assignment, the terms and conditions of the lease remains largely unchanged - It's almost like taking the original lease agreement and swapping the tenant's name with another.
With a sublease, there's more breathing space - The original tenant can decide how much rent to charge, how long the subtenant is going to stay or even collect security deposit... as long as it stays within the boundaries drawn by the original lease agreement between the landlord and original tenant.
Should You Choose Assignment of Lease or Sublease?
You are the Landlord - A lease assignment is recommended in most cases. You will have more control over your new tenant (instead of leaving matters in the original tenant's hands and hoping that he would do a good job)... plus you still have the original tenant to cover your back in case anything goes wrong.
You are the Original Tenant - Now this is a tricky one. If you want to someone to take over the entire lease and property for its remaining duration (e.g. your business goes belly-up and you no longer need the office), then help yourself to a lease assignment.
If the landlord's consent is required for assignment (and he doesn't give the nod), you can always try offering him a lease assignment fee as a deal sweetener.
However, if you are looking for someone to share the place (and rent)... or perhaps you need someone to cover the rent while you are overseas for a few short months, then a sublease would be ideal.
You are the New Tenant - An assignment of lease works better for you most of the time. You won't be at the mercy of the original tenant (for example if he screws up and the landlord terminates the original lease agreement, your sublease might also go up in flames).
But if you only want to rent part of the property... or don't want to tie yourself down for the remaining lease duration, then you are better off sticking to a sublease.
Now that we have covered the topic of assignment vs sublease, go ahead and take your pick - Click here for an assignment of lease form or Click here for a sublet agreement instead.
Landlord Tenant Law
To sublet (sublease) is to lease to another person a house or apartment that is already being leased to you. In legal terms, the landlord is the lessor, the tenant is the lessee, and the sublessee is renting from the lessee.
Assignment is an alternative to subletting in which the sublessee assumes the remainder of the original lease and deals with the landlord directly. In lease assignment, the original lessee remains financially responsible for rental payments and/or damage charges if the sublessee defaults. Novation is the term for a landlord voiding your original lease and entering into a new lease with a new tenant. In novation, you would recover your security depositproviding there is no chargeable damageand have no further legal or financial obligation to the landlord.
If you have a question about the legal aspects of leasing, legal remedies, or specific circumstances, consult an attorney.
Subletting Your Apartment
Check your lease. Are you permitted to sublet? If so, what steps or procedures must you follow? Are you required to notify your landlord in writing of your intention or to have the landlord approve any prospective sublessors? If your lease does not say anything about sublets, it is generally assumed that you can sublet.
Meet with your landlord. Discuss your intentions, gain written approval, and clarify the process with your landlord. Will the landlord permit you to terminate your lease without penalty if you locate someone to assume your lease or accept a new lease? This is usually preferable for students. If you plan to return to the apartment after a short time (one to six months) or before your lease expires, it might be better to sublet and maintain your claim on the apartment for your return. If the landlord allows subletting, or if the lease doesnt prohibit subletting, it is the landlords option whether to allow assignment or novation.
If you sublet your apartment, realize that you are for all intents and purposes a landlord. You will need to establish, collect, document, and account for a security deposit. A deposit is necessary to protect yourself, but it imposes legal obligations on you just as it does for your landlord. You should have a lease agreement, in writing, to protect yourself from any problems or legal actions brought by your tenant. An oral agreement is binding in Pennsylvania but is subject to misunderstanding and challenges in court. In a sublet, you will still be responsible for paying rent. If your tenant is supposed to pay your landlord directly (in either sublet or assignment), you are responsible for any missing or short payments and late fees. You will be responsible for any damages to the unit and may be responsible for unpaid utility bills, telephone charges, and cable TV fees. Leasing and security deposit forms and explanations are available on the Internet, at public and university libraries, and in bookstores.
Realize that the actions of your tenant may also affect you. Tenant damage to the unit, building, common areas, or systems may result in legal action against you to collect damages. Legal action also may be required for you to collect damages from your sublessee. Unintentional damage to the unit or building, such as a fire or flood, may make the unit uninhabitable. Who is responsible for paying damage costs and related tenant expenses?
Off-Campus Living recommends that, whenever possible, students terminate their leases with their landlords, have sublessors sign new leases with the landlords, recover their security deposits, and have no further legal obligations or liability to the landlords or new tenants.
Looking for a Sublet Apartment
For all intents and purposes, subletting and leasing are identical. You are the lessee and should be familiar with the requirements and standards of both lessors, but that is only slightly more complicated than a traditional lease agreement. The advantages of subletting are that you may be able to sign a lease shorter than 12 months and you may be able to pay a discounted rental rate. In most rental communities and university student housing areas, leases are for 12 months. If you only need an apartment for one term or during the summer, a sublet can be ideal. Even if the landlord becomes the lessor, the length of the lease can be negotiated for the duration of the original lease term if you wish. Although the rental rate agreed to by the landlord and original tenant is customary for the sublet, it may be possible to negotiate a discount from the tenant. Remember, if the unit is not sublet, the original tenant is responsible for paying the entire rent for the remainder of the lease term. This can be a significant incentive to negotiate.
Subletting an apartment is a legal relationship. Know your rights and obligations. Document your discussions and all agreements. Be a knowledgeable consumer, a good tenant, and an informed landlord. For more information, call or visit Off-Campus Living. To list a sublet or to check available sublets, review sublet listings or visit our office.