Sublease Agreement

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Sublease Agreement

A Brief Introduction About the Sublease Agreement

A Sublease Agreement is a legal document that is created between a tenant and or individual when the former is subleasing a property and or piece of real estate to an individual for a mutually decided period of time.

First and foremost, what is a sublease? To define a sublease, it is a lease by a tenant to a subtenant. For this very purpose, this Agreement is named as a subleasing agreement owing to the fact that the property is already leased to a tenant, which also includes a sublease apartment; sublease car who in turn, is leasing it out to another individual, thus making it a sublease.

This agreement allows the flat to be vacated even when the terms of the Agreement are not violated. The Agreement needs to clearly state the terms in case any lessee wants to vacate the flat, and what penalties will be levied.

However, leasing differs from subletting. What you need to know is the basic difference between the both, i.e  sublease vs sublet, before drafting an agreement. Subletting refers to renting and Subleasing refers to leasing agreement. Subletting would not create a derivative asset or property rights and have no period fixed defined.

Who Takes the Sublease Agreement?

For a sublease, an agreement is required. It is created between two parties, the first being the tenant who already has the property and or real estate leased out to him or her, and the second being the individual who is subleasing the real estate and or property from the tenant in context. The first party is referred to as the lessee, the second party as the Sublessor and the agreement is simply referred to as the agreement.

Purpose of the Sublease Agreement

The purpose of the Agreement is to state the terms during the stay of the lessee, the penalties involved in case if the tenant wants to leave before the Agreement is over.

Below are the points included in the Agreement.

  1. It lays down the terms and conditions of the transaction and ensures that both parties have acknowledged them.
  2. Defines the correlation between the contracting parties as tenants and landlords.
  3. Details the terms of the monthly payment and rental term.
  4. Benefits of both contracting parties, making legal recourse an option in the event of a dispute.

Contents of the Sublease Agreement

  1. Effective Date: It is required to mention when the Agreement will be initiated. All the clauses need to be included, which are involved in the contract.
  2. Parties to Contract: The clause identifies the parties and states the names and addresses.
  3. Premises: This contains the address of the property, which will be leased.
  4. Term: It defines the terms (time duration) of the lease.
  5. Renewal: This clause permits the lessee to renew his/her lease with the Sublessor and mention the increase in the rentals (if any). It mentions the conditions in which the lessee will be allowed to renew the contract and the notice period, which needs to be provided to the Sublessor in case of renewal.
  6. Monthly Payments: It defines how the lessee needs to complete the monthly payment, and if it is missed, what penalties he/she will be charged. It also mentions the charges required for the association fees, recreational fees, and insurance. The homeowner includes all the terms and conditions under which the monthly rent can be increased or changed.
  7. Security Deposit: A particular amount required to be paid as a security deposit is mentioned in this clause.
  8. Possession: This Agreement also mentions the date, time, and month when the tenant can occupy the premises. Usually, the lessee can occupy the apartment.
  9. Damage Deposit: The subtenant agrees shall agree to pay an aforesaid amount to cover the damages and cleaning. The sublandlord shall refund the deposit to the subtenant at the end of the term if the subleased premises are returned to the sublandlord and in sound condition.
  10. Tax: Subtenant agrees to pay excises, privileges, and taxes against the subleased premises, and personal property.
  11. Default: The subtenant defaults in any of the following cases
    1. If the subtenant fails to pay the rent to the sublandlord
    2. Failure in performing any obligation as stated in the agreement
    3. Abandonment of the subleased premises by the subtenant.
  12. Notices: All the notices by the subtenant should be provided to the subtenant in writing to the address mentioned in the agreement.
  13. Insurance: The subtenant will carry insurance similar to that issued by the sublandlord under the master lease, and include both- the sublandlord and landlord as insured on all policies.

A sublease agreement template elucidates on each of these clauses, that are mandatory inclusions of any commercial sublease agreement.

How to Draft the Sublease Agreement?

The process of drafting an agreement is mentioned hereunder. Before the sublease agreement is drafted, the terms and conditions stated in the Agreement include the duration of the sublease of the property, the consideration payable for the sublease, and the clauses in the Agreement.

Both parties need to come to a consensus regarding all the clauses in the Agreement, and then an attorney can be appointed to prepare an agreement according to the mutually agreed terms and conditions decided by the parties.

The contract must be signed by both parties, and the registration formalities should be completed in court.

  1. The effective date of the Agreement.
  2. The individual’s name and address of the parties to the Agreement and the relationship between them.
  3. Details of the location of the premises including the measurements in square feet.
  4. Provisions for renewal of the Agreement, if any.
  5. Consideration: The due date for payment, frequency of payment, the payment schedule, and a security deposit.
  6. Closing date: Date on which the sub-lessee obtains possession.
  7. The rights and responsibilities of the parties to the Agreement
  8. Responsibility for payment of utilities and taxes.
  9. Rules to be followed by the tenant during the tenancy.
  10. Governing laws in accordance with which the Agreement is drafted.
  11. Responsibilities suggesting that the tenant should not disturb the neighbors.
  12. Hazardous materials: The tenant has no right to keep any hazardous materials in the condominium.
  13. Landlord’s right to access the property by the landlord.
  14. Representations and covenants.
  15. Provisions for amendment of the Agreement or termination should be included.
  16. A checklist should accompany the Agreement where the tenant certifies that he or she is satisfied with the condition of the property.
  17. Condos from the pre-1978 era need to provide a declaration that confirms that lead-based paints have not been used.
  18. The jurisdiction where disputes relating to the Agreement will be settled.
  19. Signature: There should be a page reserved for signatures of both parties which shows acceptance of terms 

Lastly, the language of the Agreement should not be complicated or ambiguous.

Negotiation Strategy

The sub-lessee should inspect the property to determine its condition and then making an offer to the lessee. Depending on the rental for a similar property, the lease rental should be finalized.

Benefits & Drawbacks of the Sublease Agreement

Benefits:

The most significant benefits of having an agreement are as follows.

The document is a legally binding document which is admissible proof in a court of law.

Drawbacks:

In the absence of a Sublease Agreement, neither of the parties has legally documented proof for the understanding that is present between two entities, and thus, if the matter is ever brought to court, both parties stand to lose.

What Happens in Case of Violation?

In the case of violation of an agreement, some of the remedies come into effect, and under a few of the cases, the arrangement is dissolved, and a new set of terms and conditions are agreed upon.

A Sublease Agreement is created with the intention of mitigating the risk of a dispute, hassles, and any confusion that might arise in the future(1). If you have trouble housing for your apartment, or clueless on how to sublease an apartment, online classifieds like craigslist sublease offer several options to choose from. Also, it is always suggested that tenants and individuals create a Sublease Agreement when there is a need for subletting a property and or real estate.