Can someone please explain to me how a sublet (sub lease) works?
@Syrica Brown . Larry Landlord rents a house to Tina Tenant. Tina has six months left on her lease (or whatever) and wants to move someplace else. Or, maybe she has a really cheap rent she is paying, and market rents are much higher. Tina finds Sam Subtenant, who leases from Tina. Maybe his rent is higher and Tina makes a profit. Maybe she charges him the same amount she is paying, and that lets her live someplace else. Tina is the tenant of Larry. Sam is the tenant of Tina. Under Alabama law, Tina now has all the legal responsibilities a landlord has, including the responsibility to make repairs, etc.
I strongly discourage people from entering into subtenancy relationships. It is far better if the landlord just lets Tina out of her lease, and accepts Sam as a new tenant.
Or, the landlord might let Tina out of her lease, accept Sam as a new tenant, but also require Tina to guarantee Sam's lease for the final six months (using my example) of Tina's lease term.
Either one of these accomplishes everybody's goals without getting into messy technicalities that come about with a sublease.
Most leases contain prohibitions against subleasing without the landlord's consent.
Many leases charge a one-time fee if the tenant subleases, or is let out of their lease and a new tenant accepted.That is because the situation causes extra work and risk for the landlord. The fee is often 10% of the gross rent due for the balance of the term. If there were six months left on the lease, at $1,000 per month, the gross rent would be $6,000 and the fee would be $600. Other landlords charge a flat fee, ranging from $50 to $500, depending on the market. if the tenant (Tina in my example) is going to be charged a fee for being let out of their lease and a new tenant accepted, then the tenant should refuse to guarantee the new lease. After all, the landlord is getting extra money to help cover the new risk. Of course, that is a matter of negotiation, and the landlord might not agree.
While it is not uncommon for a commercial tenant to have a below-market rental rate, it is very rare for residential tenants. That is because commercial leases are typically negotiated for much longer terms, often with renewal options. But, most commercial leases also contain a clause saying that if the tenant subleases at a higher rental rate than it is paying, the landlord gets the profit.
@Denise Evans thanks for responding.
I received the tax certificate on a property and I was told the owner has a renter in the property. I'm not sure how to handle the situation. I watched your video and it mention sublease (subtent)
Approach the owner. Tell him you are entitled to possession because of the tax sale. You know he will probably redeem, and you don't want to sue him and just increase his redemption charges as a result. Instead, you would be willing to lease the property to him for a nominal monthly fee, and he can then sublease to his tenant already in the property. That way he can use the rental income to save up his money and redeem. Just make sure you have a good lease that lets you out of the maintenance and upkeep and other responsibilities. It has to be worded just right.
@Denise Evans again thanks for responding.
I'm trying to play out different scenarios.....
What if the owner decides he doesn't want to do a sublease. What are my option at that point? Am I allowable to eject the current tenants? If so, how long is the ejectment process?
@Syrica Brown , if you have a tax certificate you must give written notice to vacate to the owner (do not contact the tenants) and then wait 6 months and then you can file an ejectment lawsuit. If he redeems, he will have to pay your legal fees for the lawsuit in addition to all other charges. If you have a tax deed, you can file ejectment immediately.
I also recently learned that when you file an immediate ejectment, and there is no response within 10 days, they lose their right of redemption. This was on a foreclosure at a house I bought at courthouse auction.
Join the Largest Real Estate Investing Community
Basic membership is free, forever.