Subletting: Should You Allow It? A Landlord's Complete Guide to Sublease Policies

By PropsManager Team · Legal & Compliance · Dec 27, 2024

I got the call on a Tuesday afternoon. My tenant of three years—great guy, always paid on the first—had just accepted a job transfer to Denver. His lease didn't expire for another eight months. He didn't want to break the lease and eat the penalty. Instead, he asked: "Can I sublet to my buddy from work?"

That one question kicked off a chain of events that taught me more about subletting than any textbook ever could. And after managing rentals for over a decade, I can tell you this: your answer to that question will shape your entire landlording experience.

Subletting isn't inherently good or bad. It's a tool. Used correctly, it keeps rent flowing and units occupied. Handled poorly, it can cost you thousands in damages, legal fees, and headaches you never saw coming.

Let's break down everything you need to know.

What Exactly Is Subletting?

At its core, subletting (or subleasing) is when your existing tenant rents out all or part of their unit to a third party—the sub-tenant. Your original tenant remains on the lease. They're still legally responsible for rent, damages, and lease compliance. The sub-tenant pays rent to your tenant, who then pays you.

Sounds simple enough, right? In theory, sure. In practice, it gets complicated fast.

There are two main subletting scenarios landlords encounter:

• Full sublet: Your tenant vacates entirely and a new occupant moves in for the remainder of the lease term. This is common with job relocations, military deployments, or extended travel.
• Partial sublet: Your tenant stays in the unit but rents out a room to someone else. Think of a two-bedroom apartment where your tenant fills the spare room with a roommate who isn't on the lease.

Both carry risk. Both can work. The difference is almost always in how you manage the process.

The Real Risks of Allowing Subletting

Let's not sugarcoat this. Subletting introduces variables you didn't sign up for, and some of them can bite hard.

You Didn't Screen That Person

This is the big one. When you signed the original lease, you ran credit checks, verified employment, called previous landlords, maybe even ran a background check. You did your homework. With an unauthorized sublet, none of that happens. You've essentially handed the keys to a stranger.

I've seen sub-tenants with eviction histories, credit scores in the 400s, and one memorable case where the "buddy from work" turned out to have an active warrant. That's not a situation you want to discover after they've already moved in.

The Airbnb Problem

Here's a scenario that's become depressingly common since about 2016: your tenant lists the unit on Airbnb or VRBO without telling you. Suddenly, your quiet one-bedroom is hosting bachelor parties every weekend. Neighbors are furious. The hallway smells like a bar at 3 AM. And your insurance? It probably doesn't cover short-term rental activity.

According to a 2023 survey by the National Apartment Association, roughly 12% of property managers reported unauthorized short-term rental activity in their buildings. The average cost to remediate damage from these situations? Around $3,200 per incident.

Liability Gaps

If the sub-tenant gets injured in the unit, who's liable? If they cause a fire, whose insurance covers it? If they're running an illegal business out of the apartment, are you on the hook? The answers depend on your lease language, your state laws, and whether you approved the sublet—but the questions alone should keep you up at night.

Loss of Property Control

When you have a direct relationship with your tenant, communication flows smoothly. Need to schedule an inspection? You text your tenant. Furnace needs servicing? They let you in. With a sub-tenant, you're dealing with someone you may have never met, who may not know your rules, and who has zero loyalty to you as a landlord.

The Benefits of Allowing Subletting (Yes, There Are Some)

It's not all doom and gloom. For landlords who manage it correctly, subletting offers real advantages.

Vacancy Avoidance

An empty unit is a money pit. If your tenant needs to leave six months early on a $1,500/month lease, that's $9,000 in potential lost rent. A sublet keeps that income flowing. Even if the sub-tenant pays slightly less, it beats a dark, empty apartment that's costing you money every single day.

Tenant Retention

Here's something most landlords don't think about: allowing subletting can actually make good tenants stick around longer. A tenant who travels frequently for work might sublet during their absences rather than giving up a unit they love. A tenant going through a temporary financial rough patch might bring in a roommate to split costs, keeping them current on rent instead of falling behind.

Legal Requirements in Some Jurisdictions

In certain cities—New York being the most notable example—tenants have a legal right to sublet under specific conditions, and you can't unreasonably refuse. If you own property in a jurisdiction with tenant-friendly subletting laws, you might not have a choice. Better to build a solid process than to fight a battle you legally can't win.

Reduced Turnover Costs

Every time a unit turns over, it costs money. Cleaning, repairs, painting, listing fees, vacancy days—the average turnover cost for a standard apartment runs between $1,500 and $5,000 depending on the market. A well-managed sublet can delay or eliminate that expense entirely.

Subletting vs. Lease Assignment vs. New Lease: What's the Difference?

This is where a lot of landlords get confused, so let's clear it up with a quick comparison.

My recommendation? In most cases, a lease assignment or brand-new lease is cleaner and safer than a sublet. But there are absolutely situations—temporary relocations, military deployments, study-abroad semesters—where a sublet is the right call.

How to Build a Bulletproof Subletting Policy

If you're going to allow subletting, do it right. Here's the framework I use across all my properties, and it's saved me from more problems than I can count.

Step 1: Start With Your Lease Language

Your lease should contain an explicit subletting clause. Don't rely on vague language or verbal agreements. Here's the key phrase that needs to be in every lease you write:

"Tenant shall not sublet the premises, or any part thereof, without the prior written consent of the Landlord. Any subletting without written consent shall constitute a material breach of this lease."

That's your foundation. It doesn't ban subletting—it gives you control over the process. There's a huge difference between "no subletting ever" and "no subletting without my approval." The second version is more enforceable in most states and gives you the flexibility to say yes when it makes sense.

Step 2: Create a Formal Subletting Application

When a tenant requests permission to sublet, don't just wing it. Have a standardized process. Require the tenant to submit:

• The proposed sub-tenant's full legal name and contact information
• Employment verification and proof of income (I require 3x the monthly rent)
• Written consent for a credit check and background screening
• Two previous landlord references
• The proposed subletting term (start and end dates)
• A copy of the proposed sublease agreement

This isn't bureaucracy for the sake of bureaucracy. It's due diligence that protects your property.

Step 3: Screen the Sub-Tenant Like Any Applicant

Run the same screening you'd run for any new tenant. Credit check. Background check. Eviction history. Employment verification. Landlord references. If they don't pass your standard criteria, they don't get approved. Period.

I know landlords who skip this step because "it's just a sublet" or "the tenant vouched for them." That's how you end up with a nightmare occupant and no recourse. Using a platform like PropsManager makes this screening process seamless—you can run applications, background checks, and document everything in one place.

Step 4: Keep the Original Tenant on the Hook

This is non-negotiable. Your original tenant must remain fully liable for rent, damages, and lease compliance throughout the subletting period. Put it in writing. Make sure the sublease agreement explicitly states that the original tenant is responsible for their sub-tenant's behavior.

Why? Because if the sub-tenant stops paying rent, you need someone to chase. If the sub-tenant damages the property, someone needs to pay for it. Your lease is with the original tenant, and that's where your legal standing is strongest.

Step 5: Require a Sublease Agreement

The sublease should be a separate written agreement between your tenant and the sub-tenant. You should receive a copy and approve it before anyone moves in. The sublease should mirror the terms of your original lease—same rules about pets, noise, parking, guests, and everything else.

Some landlords also require a direct agreement between themselves and the sub-tenant. This creates a secondary layer of accountability and gives you standing to communicate directly with the person living in your unit.

Step 6: Charge a Reasonable Subletting Fee

Many landlords charge a subletting fee to cover the administrative costs—application processing, additional screening, document review. A fee of $150 to $300 is standard in most markets. Check your local laws, though. Some jurisdictions cap what you can charge or prohibit subletting fees altogether.

When You Should Absolutely Say No

Not every sublet request deserves a yes. Here are the red flags that should trigger an automatic denial:

• The proposed sub-tenant fails your screening. No exceptions.
• Your tenant is trying to profit from the sublet. If they're paying $1,200/month and plan to charge the sub-tenant $1,800, that's a red flag. They're essentially running a rental business out of your property without your cut.
• Short-term or vacation rental activity. Unless your property is specifically set up for short-term rentals with appropriate insurance and licensing, shut this down immediately.
• The tenant can't provide basic information about the sub-tenant. If they met the person on Craigslist yesterday and can't tell you anything about them, that's a no.
• Your insurance doesn't cover subletting. Call your insurance company before approving any sublet. Some policies exclude sub-tenants from coverage entirely.

State Laws You Need to Know

Subletting laws vary dramatically by state, and ignorance isn't a defense. Here are some key points:

• New York: Tenants in buildings with four or more units generally have the right to sublet. Landlords can charge the original tenant for reasonable costs related to the sublet.
• California: Landlords can prohibit subletting in the lease. If the lease is silent on the issue, subletting is generally permitted.
• Texas: Subletting can be prohibited in the lease, and if the lease says no, it means no. Texas courts generally enforce these provisions strictly.
• Illinois: Similar to California—if the lease doesn't address subletting, it's often considered permitted by default.

Always check your specific state and local regulations. Some cities have their own rules that override state law. When in doubt, spend $200 on a consultation with a local real estate attorney. It's the cheapest insurance you'll ever buy.

Managing Active Sublets Without Losing Your Mind

So you've approved a sublet. Now what? Here's how to stay on top of things.

Document Everything

Take photos of the unit before the sub-tenant moves in. Record the condition of every room, appliance, and fixture. This protects you if there's a damage dispute later. PropsManager's documentation tools make it easy to store photos, inspection reports, and communication logs all in one place.

Maintain Communication

Introduce yourself to the sub-tenant. Give them your contact information and emergency procedures. Make sure they know the building rules. A quick welcome email sets expectations and establishes a communication channel you'll need later.

Schedule a Mid-Term Inspection

Don't just hand over the keys and disappear. Schedule inspections during the subletting period, with proper notice as required by your state. This lets you catch problems early before they become expensive disasters.

Collect Rent From Your Tenant, Not the Sub-Tenant

Keep the payment structure clean. Your tenant pays you. The sub-tenant pays your tenant. If you start collecting rent directly from the sub-tenant, you risk creating an implied landlord-tenant relationship that could complicate things enormously if you need to take legal action later.

You can automate rent collection and track payments effortlessly with tools like PropsManager, ensuring you always know who's paid and who hasn't—regardless of the subletting arrangement.

Real-World Subletting Scenario: How I Handled It

Remember my tenant who wanted to sublet to his buddy? Here's what actually happened.

I told him I'd consider it, but the buddy needed to go through my standard screening. Application came back decent—680 credit score, stable job, no eviction history. His previous landlord gave a lukewarm reference ("He was fine, paid on time, but left the place messy"). Not a glowing endorsement, but not a deal-breaker.

I approved the sublet with conditions: my original tenant stayed on the lease, I collected a $200 subletting fee, the sub-tenant signed a direct acknowledgment of house rules, and we did a documented move-in inspection.

Six months later, the sub-tenant moved out. The unit needed a deep clean—about $350 worth—which I deducted from the security deposit after documenting the condition. My original tenant wasn't thrilled, but he understood. Everyone moved on. No lawsuits, no drama, no vacancies.

That's what a well-managed sublet looks like. Boring? Yes. Profitable? Also yes.

The Bottom Line: Sublet Smart or Don't Sublet at All

If I had to boil down twenty years of landlording into one subletting rule, it'd be this: never allow an uncontrolled sublet. Either manage the process with the same rigor you'd apply to any new tenant, or don't allow it at all.

For many landlords—especially those with smaller portfolios or properties in areas with low vacancy rates—a simple "no subletting" policy is perfectly reasonable and much easier to enforce. If a tenant needs to leave early, terminate the lease (with appropriate notice and penalties as outlined in your lease), handle the early termination properly, and find a new tenant yourself.

But if you're in a market where vacancies are expensive, or you have reliable tenants who occasionally need flexibility, a well-structured subletting policy can be a genuine asset. Just don't cut corners on the process.

Subletting Policy Checklist for Landlords

Use this checklist before approving any subletting request:

• Lease contains explicit subletting clause requiring written approval
• Tenant submitted formal sublet application with sub-tenant details
• Sub-tenant passed credit check (minimum score threshold met)
• Sub-tenant passed background and eviction history check
• Employment and income verified (3x rent minimum)
• Previous landlord references checked
• Original tenant remains fully liable on the lease
• Written sublease agreement reviewed and approved
• Subletting fee collected
• Insurance company notified and coverage confirmed
• Move-in inspection completed and documented
• Sub-tenant received house rules and emergency contacts
• Mid-term inspection scheduled

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Frequently Asked Questions

Can I charge my tenant extra for subletting?

In most states, yes—you can charge a reasonable administrative fee to cover screening and processing costs. Typical fees range from $150 to $300. However, some jurisdictions limit or prohibit these charges, and you generally can't charge an amount that's designed to discourage subletting rather than cover actual costs. Check your local regulations before setting a fee.

What happens if my tenant sublets without my permission?

An unauthorized sublet is typically a lease violation, assuming your lease includes a no-subletting clause. You can issue a cure-or-quit notice, and if the tenant doesn't resolve the situation, you can begin eviction proceedings. Document the unauthorized occupant thoroughly—photos, witness statements, any communications. This evidence is critical if things end up in court.

Am I legally required to allow subletting?

It depends on where your property is located. In most states, you can prohibit subletting outright in your lease. However, some jurisdictions—notably New York City for buildings with four or more units—give tenants a statutory right to sublet, and you can only deny them for reasonable cause. Always consult local landlord-tenant law or an attorney for your specific situation.

Should I collect a separate security deposit from the sub-tenant?

You can, and many landlords do. A separate deposit from the sub-tenant—typically equal to one month's rent—gives you an additional financial cushion. Keep the deposits separate and follow your state's security deposit laws regarding holding, interest, and return timelines. Some landlords instead require the original tenant to increase their existing deposit to cover the added risk.

Is it better to allow subletting or just do a lease assignment?

For permanent departures, a lease assignment is almost always cleaner. It fully transfers responsibility to the new tenant, gives you a direct legal relationship, and eliminates the complications of a three-party arrangement. Subletting works better for temporary situations—a few months away for work, a semester abroad, or a short-term relocation. If the original tenant is never coming back, skip the sublet and do an assignment or a new lease entirely. For more on managing lease transitions effectively, having solid documentation processes makes all the difference.

Take Control of Your Subletting Process

Managing subletting requests manually—paper applications, scattered emails, handwritten inspection notes—is a recipe for missed steps and costly mistakes. PropsManager gives you a centralized platform to handle tenant screening, document storage, lease management, and rent tracking, so every subletting arrangement is processed with the same thoroughness as a new lease.

Whether you manage two units or two hundred, having a system that keeps your documentation organized and your screening consistent is the difference between a profitable sublet and an expensive disaster.

Ready to streamline your property management? Check out our pricing or request a demo to see how PropsManager can help you manage subletting, tenant screening, and everything else that comes with being a landlord.