Tenants and Subtenants: A Primer on Legitimate Subletting

In our feature, we discussed one type of an illegal sublet: when a tenant rents out his or her apartment using short-term rental Web sites. But what happens when a tenant approaches you about a long-term rental agreement with another individual? In these situations, the tenant wants you to approve a legitimate sublet request.

A sublet is a rental arrangement in which a tenant rents his or her apartment for a specific period of time to another person, called a subtenant. In a sublet, the original tenant keeps the right to return and reoccupy the apartment when the sublease ends. For example, a tenant with one year remaining on his lease may rent his apartment to a co-worker for the summer while he goes on vacation. At the end of the summer, the tenant would return to the apartment for the balance of the lease term. During the time in which the apartment is sublet, the tenant remains responsible for all lease obligations, including rent.

Sublet Basics

Usually, the tenant and subtenant sign a lease of their own, called a sublease. The subtenant is bound by both the terms of the sublease and by the terms of the tenant's lease with the owner. The tenant can enforce the sublease in the same way that the owner can enforce the lease. If the subtenant doesn't live up to the sublease terms, the tenant can sue the subtenant and evict him.

With regard to the relationship between the owner and subtenant, in theory, the subtenant and the owner needn't deal with each other. The owner has no direct control over the subtenant. If the subtenant violates the lease, the owner can act against the tenant only. The tenant's the one who signed the lease and agreed to be responsible to the owner. To avoid a breach of the lease, the tenant must then take action against the subtenant. If the tenant doesn't act, and if the lease violation continues, the owner can sue to evict the tenant and cancel the lease—which cancels the sublease too.

Who Can Sublet?

All tenants who want to sublet must meet three legal requirements:

Tenant must have a current lease for the apartment. All rent-stabilized tenants meet this requirement. Rent-controlled tenants do not because rent-controlled tenants either never had a lease or, if they once had one, the lease has long since expired.

Tenant must live in a building with four or more residential units. This requirement doesn't eliminate any rent-stabilized tenants because rent stabilization applies only to buildings with six or more units.

Tenant must not be renting in a co-op or in public housing. The sublet law doesn't give any sublet rights to co-op shareholder tenants or tenants of public housing, or housing “for which there are constitutional or statutory criteria covering admission.” But the sublet law applies to rent-stabilized tenants who live in buildings that have undergone a co-op conversion.

Besides the three broad requirements above, there are special requirements for rent-stabilized tenants. Make sure your rent-stabilized tenants who want to sublet meet the following extra requirements:

Primary residence. To sublet, a rent-stabilized tenant must show two things: (1) that she has used the apartment as a primary residence; and (2) that she intends to return to the apartment and occupy it as a primary residence at the end of the sublease. This two-pronged primary residence requirement puts a heavy burden on a tenant, and may even discourage or prevent the tenant from attempting to sublet. For example, a tenant who isn't occupying a unit as a primary residence may avoid asking to sublet for fear of opening a can of worms that could result in losing the apartment.

Even tenants who can show that an apartment has been their primary residence can't necessarily show intent to return to the apartment as a primary residence when the sublet ends. Owners can reject sublet requests from tenants who can't establish that they'll come back.

Two-year limit. A rent-stabilized tenant can't sublet for more than two years within a four-year period.

No overcharging. A rent-stabilized tenant can't charge a subtenant more than the legal regulated rent, plus a 10 percent surcharge if the unit is fully furnished. If a tenant overcharges his subtenant, which is a common occurrence, the subtenant may sue the tenant for triple damages and the owner may terminate the lease.

Requiring a Proper Sublet Request

Tenants who meet the legal requirements for subletting still can't just go ahead and sublet. They must first ask your permission. The sublet law says that subletting is subject to the written consent of the landlord in advance of the subletting [RPL §226-b (1)].

The tenant must follow a certain procedure when making a sublet request, and give you certain information. If the tenant doesn't make the sublet request properly, you can reject it. That's why it's important for the owner to know precisely how the tenant's sublet request must be made.

The tenant's sublet request must meet these requirements:

• It must be in writing.

• It must be sent to the owner by certified mail, return receipt requested.

• It must state the term of the proposed sublease.

• It must state the name of the proposed subtenant.

• It must give the business and permanent home address of the proposed subtenant.

• It must explain the tenant's reason or reasons for subletting.

• It must list the tenant's address for the term of the proposed sublet.

• It must contain the written consent of any co-tenant or guarantor of the lease.

• It must contain a copy of the proposed sublease acknowledged by both the tenant and the proposed subtenant as being a true copy of the sublease.

Since the sublet request requirements are complex, it's easy for a tenant to overlook one or more of them. If this happens, you can ignore the tenant's mistake and pretend that a valid sublet request was made. Or you can reject the request because of the mistake. But make sure there's a real problem with the request before rejecting it, because the issue of whether or not the request is defective is likely to wind up in court.

Owner's Time to Respond to Request

The amount of time you have to respond to a tenant's sublet request depends on the course of action you decide on. Here are your options:

1. If you don't want additional information about the sublease or the subtenant. You must send a notice to the tenant either accepting or rejecting the sublet request within 30 days of the date the tenant mailed you the request.

2. If you want more information from the tenant. You must make your request for more information within 10 days after the tenant sends you the written request to sublet.

3. If you requested additional information and the tenant supplied it. You must send a notice to the tenant either accepting or rejecting the sublet request within 30 days of the date the tenant mailed you additional information.

Remember that the deadlines are critical. If you miss the 10-day deadline to request more information, you must make a decision based on information the tenant initially sent you. And if you miss the 30-day deadline to reject, it's as good as consenting to the sublet. According to the law, the owner's failure to send such a notice “shall be deemed to be a consent to the proposed subletting” [RPL §226-b (2)(c)].

Tenant's Options After Owner Responds

A tenant has these options after an owner responds:

1. If an owner consents to a sublet. The sublet may proceed according to the terms of the tenant's request. The tenant remains ultimately responsible for his lease obligations, including paying the rent.

2. If an owner denies permission to sublet on reasonable grounds. The tenant can't sublet, and the owner isn't obligated to release the tenant from the lease. If an owner reasonably refuses a sublet request, and the tenant responds by breaking the lease, the owner can sue the tenant for lost rent.

Some valid reasons for refusing a tenant's sublet request include the tenant's sublet request being defective, the tenant not intending to return to the apartment, the owner finding the proposed subtenant to be unsuitable, and the rent that appears on the proposed sublease exceeds the legal regulated rent.

With regard to the tenant's intention to return, it's unrealistic to expect the tenant to come right out and tell you that he doesn't plan to return to the apartment. The best way to get the information you need about the tenant's intentions is to ask detailed questions about what the tenant plans to do during the sublet and when the tenant plans to return to the apartment.

You can also ask the tenant to submit documents to support his answers. Looking at the tenant's answers and the documents he submits can help you determine whether the tenant intends to return.

Here are some questions you may want to ask:

• Will the tenant move all his furniture?

• Has the tenant bought a home or apartment elsewhere?

• Does the proposed subtenant intend to use the address of the New York City apartment on his income tax returns, car registration, driver's license, and voting registration?

• Does the tenant have proof (that is, a signed employment contract or statement from the employer) that the job or other activity taking him outside New York City is temporary?

If the answers to the first three questions are yes and the tenant has no proof to convince you otherwise, there's a good chance that the tenant intends to establish permanent roots at the new location and doesn't intend to return. So you can reasonably reject the sublet request.

Also, finding a proposed subtenant to be unsuitable is a valid reason. You can usually judge a proposed subtenant's suitability by the same standards you'd use to judge a tenant's suitability. These include the proposed subtenant's financial situation and the suitability of the subtenant's proposed use of the apartment. For instance, if the tenant's rent is $1,500 per month and the subtenant earns only $1,000 per month, the subtenant's inability to pay the sublease rent would be a good reason for you to refuse the sublet request.

You can also ask whether the subtenant has ever been evicted. Or you can do a background check, as you would for a tenant. Say you discover that the proposed subtenant was evicted from his last apartment for being a nuisance tenant. This would be a good reason for refusing the sublet request.

3. If an owner denies permission to sublet on unreasonable grounds. The law clearly states that a tenant can proceed with the sublet in accordance with the sublet request. But the tenant can't break the lease if the owner unreasonably refuses to allow the sublet.

If the tenant goes ahead with the sublet, the owner can contest the sublet in court. Or the tenant can challenge the unreasonableness of the owner's decision in court. If a judge ultimately determines that the owner acted in “bad faith” by withholding his consent, the tenant may get court costs and attorney's fees. This important provision means that owners shouldn't automatically challenge every sublet request. An owner should challenge only those requests that are truly unreasonable. A policy of rejecting all sublet requests can prove costly under the sublet law.