What happens when a tenant finds themselves unable to make the rent payment? Or when they decide to move out early? Or when they will be traveling for two weeks and see a chance for some quick cash from renting their apartment to a vacationer during that time?
As online services like Airbnb and Craigslist have grown easier and more ubiquitous in recent years, short-term renting has skyrocketed in popularity. It is no coincidence that these easy outlets for subleasing arose in the context of a more constricted economy, as shifting job availability and lower incomes dictated a need for more creativity and flexibility.
But is subleasing in the landlord's best interest, with unscreened strangers staying in the rental property, possibly with pets, or criminal backgrounds? Tenants of a posh New York City apartment building were recently admonished by management after taking to popular short-term stay sites like Airbnb, Craigslist and Roomorama to sublet their apartments.
In a memorandum to tenants, management for TF Cornerstone, Inc informed tenants that subletting their apartments was illegal and a direct violation of the lease. Tenants were informed that such behavior created a security risk and a transient environment. Management also reiterated to tenants a section from their lease contract detailing the need for landlord’s written permission for any such sublease agreement.
What the management company failed to mention in its memorandum was the fact that individuals who short-term sublet their spaces while absent are subject to fines ranging from $1,000 for a first offense to $20,000 for repeated violations, according to a New York City Council bill passed in October 2011. This new law applies to buildings with more than four units.
It seems New York City is taking the issue of illegal short-term rentals very seriously; no one knows better than Nigel Warren, a tenant in an East Village apartment who subleased his room for $100 per night while off on a 3-night trip to Colorado. When he returned, he was hit with multiple fines totaling $40,000 for the illegal act.
When Warren showed up for a scheduled hearing on the matter, he learned his luck had turned and that because of a paperwork error, his case would be dismissed.
Like Warren, most tenants don’t bother with the formalities of seeking the landlord's approval before subletting their apartments. Landlords and property managers routinely address this issue by adding a clause that tenant must obtain written permission, and that the absence of such permission constitutes a violation of the lease agreement. The majority of U.S. states are silent on the issue of subleasing, while others require landlords’ permission. Currently, there are only a handful of states with regulations expressly requiring landlords to accept "reasonable" subleasing requests. In New York, landlords who own or manage more than four units must allow reasonable sublet arrangements when requested.
In most Canadian provinces, subleasing is legal and allowed; landlords are not permitted to refuse without just cause.
In cases where landlords do allow subleasing, both in the U.S. and Canada, landlords should consider the following: (1) careful screening of sub-lessees, (2) type of transaction (lease assignment vs. sublease), (3) knowledge of the local and state laws regarding subleasing in the area, (4) terms of the sublet agreement (5) existing alternatives if any, (6) impact on other residents and (7) reasonable refusal if necessary.
Some states, such as New York, are no longer leaving it entirely up to landlords to address this issue. New York state law says you cannot rent out single-family homes or apartments, or rooms in them, for less than 30 days unless you are living in the home at the same time.
Other cities such as San Francisco and New Orleans have taken similar positions on this issue and are said to have even more stringent laws on short-term subleases. Short-term, in most cases, refers to 30 days or less and applies to buildings with more than four rental units.
Despite warnings about the illegalities of short-term subleasing, it will likely remain a popular choice among renters for some time to come, especially given its’ recent popularity on sites like Airbnb, Craigslist, Roomsters, and the like.
Landlords should be sure to protect themselves, and perhaps their tenants, with airtight clauses addressing both long and short-term subleases based on their local and state/province laws.