Subletting vs Subleasing: What Is the Difference?

Even real estate professionals get these terms confused, so it’s essential to learn about this topic from trusted sources. Luckily, we have years of experience and are here to explain the difference between subletting vs subleasing.

In this post, we’ll define each term, give examples of how they work, and discuss their pros and cons. Keep reading to learn more!

What Is a Sublet?

A sublet is a rental agreement where an existing tenant finds a new tenant that the landlord can lease the property to. In most sublets, the original tenant is moving out and leaving the property. However, there are cases where the original lessee plans on returning and continuing their lease.

In a sublet, the landlord enters into an entirely new contractual relationship with the new renter. The new renter pays rent money to the landlord and is legally responsible for fulfilling the lease terms.

Example of a Sublet

Say that Marcus is renting an apartment in New York. He signed a one-year lease and has lived in the property for the past six months.

One day, Marcus gets promoted at his job and has to move out of state. He wants to avoid breaking his lease but can’t afford to pay for two leases plus moving costs.

As a solution, Marcus decides to sublet his apartment to a new tenant. He reaches out to his friend, Warren, who agrees to take over the lease.

Warren enters into a new contract with the landlord of the apartment. Marcus moves to a new state, Warren gets a new place, and the landlord does not have to worry about finding a new tenant.

What Is a Sublease?

A sublease is a rental agreement where an existing tenant leases a rental property to a new tenant. In a sublease, the original tenant creates an entirely new rental agreement with the subtenant. They can either rent out a portion of the property or the entire property.

Either way, the sublease agreement does not nullify the original lease agreement that the tenant signed with the landlord. The first tenant must continue to pay rent and fulfill all terms of the original lease. When that lease expires, so does the new rental lease with the subtenant.

Example of a Sublease

Say that Veronica just moved into a two-bedroom apartment. She loves her new space but isn’t using the extra bedroom as much as she had anticipated.

Veronica feels she is wasting money by paying for the extra room, so she decides to sublease it. First, she checks the terms of her existing lease and gets the landlord’s consent.

Then, she asks her friend Anise if she wants to rent the extra room in her apartment. Anise agrees, and the two create a new lease where Anise pays a monthly rent to Veronica.

In this case, Veronica makes extra cash collecting rent, and Anise gets a place to live.

Sublet vs. Sublease: What Are the Key Differences?

Many people think that the terms “sublet” and “sublease” have the same meaning, but this is not the case. Let’s discuss the crucial differences between how these types of lease agreements work.

Landlord Involvement

In a sublet, the new tenant has direct contact with the landlord. This type of rental agreement requires that the tenant signs an entirely new lease with the property owner.

In a sublease, the new tenant does not have direct contact with the landlord, nor are they in a contractual relationship. The person who acts as the new renter’s landlord is the original tenant.

Original Lease

In a subletting agreement, the rental lease with the original tenant is terminated. The tenant no longer has to pay rent or follow the terms of their initial lease.

In a sublease contract, the original lease still exists. The original tenant must continue paying rent and fulfilling all the terms until the lease ends.

Payment

In a sublet, the new renter makes rent payments to the property owner.

In a sublease, the new renter makes payments to the original renter, while the original renter makes payments to the property owner.

Tenant Responsibility

In a sublet, the new tenant is responsible for the property and any damages that may incur.

In a sublease, the original tenant is responsible for the rental property. If the new lessee damages the property, the first tenant will carry the legal financial and legal responsibility.

See our table for a breakdown of the differences between a sublet vs. sublease:

Pros and Cons of Subletting and Subleasing

Real estate professionals must know the advantages and disadvantages of subletting vs. subletting. Let’s discuss some of the pros and cons of each lease type.

Pros and Cons of a Sublet Agreement

​​Subletting appeals to tenants because it allows them to end their lease early or pause it for a while. They can do so without hurting their credit score, incurring fees, or getting a bad reputation as a renter. In a sublet, the property is not left vacant and is less likely to be burglarized.

One drawback to subletting for tenants is that it can be challenging to find a new renter to take over the lease. Even if they find one, there is always the chance that the subtenant will break their lease or damage the property.

For landlords, a sublet is appealing because the tenant does not leave them high and dry. The landlord continues to collect rent from the new tenant, and the property is not left vacant.

However, the downside to subletting for landlords is that the new renter may not be as reliable as the first. The landlord should always screen the subtenant to ensure they have a good reputation.

Tenants

Pros of Subletting

• Can Move Properties Without Breaking the Lease
• Can Leave For a Time Period and Come Back
• Lower Burglary Risk
• Credit Score Not Impacted

Cons of Subletting

• Difficulty Finding New Tenants
• New Renter May Fall Behind on Payments
• New Renter May Damage the Property

Landlords

Pros of Subletting

• New Tenant Takes Over Rent Payments
• The Property Is Not Vacant

Cons of Subletting

• New Renter May Break the Lease
• New Renter May Damage the Property

Pros and Cons of a Sublease Agreement

A sublease appeals to tenants who have extra space in their apartment and want to make extra money. In a sublease, the original tenant can collect rent from the subtenant and continue living in their space. They also have the option to move away from the property while subleasing it to the new renter.

The downside of subleasing for tenants is that they are still accountable for their initial lease. Even if they vacate the property, they must continue paying rent to the landlord. Another issue is that the first tenant is responsible if the subtenant makes late rent payments or damages the property.

Tenants

Pros of Subleasing

• • Can Make Extra Money Leasing to New Renters
  • • Can Move to a New Property
    • • Can Avoid Paying for Multiple Leases

      Cons of Subleasing

      • • May Have to Charge Less for Rent
        • • Still Responsible for the Initial Lease

          Landlords

          Pros of Subleasing

          • • Tenant Keeps Paying Rent
            • • The Property Is Not Vacant
              • • Renter May Sign a New Lease After the Term

                Cons of Subleasing

                • • Subtenant May Not Meet the Landlord’s Standards
                  • • Dependant on First Tenant to Uphold the Lease

                    Sublet vs. Sublease: Which Should I Use?

                    Because many people get the terms “sublet” and “sublease” confused, they often do not know which type of agreement will work best for them. Let’s discuss when to sublet vs. when to sublease.

                    When to Use a Sublet Agreement

                    A sublet agreement works best for tenants who want to relocate to a new property without breaking their lease. Sublets allow the tenant to be freed from their contract so they can start a new lease elsewhere.

                    Another scenario where a tenant may sublet their apartment is if they plan on traveling for an extended time. For example, say that a tenant is taking a trip to Greece for four months. Because they are not living in their apartment that whole time, they may consider it a waste of money to pay for rent.

                    In this scenario, the tenant can find a new renter to sublet their apartment to for those four months. Then, they can continue their lease when they return from their trip.

                    When to Use a Sublease Agreement

                    A sublease works best for tenants who want to continue living in their space while making extra money. If a tenant has a large apartment and is willing to give up a room, a sublease agreement allows them to do so. As long as they do not mind the added responsibility of collecting rent, this type of lease is the superior choice.

                    What Terms Are Included in a Lease Agreement?

                    While sublets and subleases are two different types of rental agreements, the terms that these leases cover are similar.

                    In the case of a sublet, the landlord will write up the lease agreement. In the case of a sublease, the primary tenant will write up the lease agreement.

                    According to Adobe, a sublet and sublease agreement should include the following details:

                    • Name and contact information of the lessor and lessee
                    • Property description and address
                    • The length of the rental agreement
                    • Rent (amount and payment schedule)
                    • Fees and security deposits
                    • Included costs (utilities, furniture, etc.)
                    • Restricted activities (smoking, owning pets, etc.)
                    • Consent from the landlord via date and signature

                    Frequently Asked Questions

                    Let’s address some frequently asked questions real estate students have about sublet and sublease agreements.

                    Are Sublets and Subleases Legal?

                    Before entering a sublet or sublease agreement, all three parties must ensure these leases are legal in their state. Some local laws prohibit subletting and subleasing, while others allow it in certain instances.
                    For example, a tenant renting an apartment in New York City in a building with four or more units can legally sublease their space regardless of the initial lease terms.

                    However, the original lessee should always let the landlord know if they are initiating a sublease. If the landlord is not made aware, it could be considered an illegal sublet.

                    Are Sublets and Subleases Legally Binding?

                    A lease is legally binding whether the contract is for a sublease or sublet. Tenants must fulfill all the terms of their leases, including paying rent and maintaining the property. If a lessee violates the lease terms, they may have to pay extra fees or face legal repercussions.

                    What to Know Before the Real Estate Exam

                    A sublet requires that a new tenant signs a lease with the landlord, while a sublease requires that a new tenant signs a lease with the original lessee.

                    Real estate students must understand the differences between subletting vs subleasing before the exam. While these two terms are often used interchangeably, they are not synonymous.

                    But these aren’t the only concepts you’ll need to be familiar with before your test. Study more critical terms with our handy online Real Estate Flashcards!