What Is a Sublease Agreement?
A sublease agreement or sublet is an important term of art in Massachusetts real estate law and just about every state’s real estate law for that matter. The American Heritage Dictionary defines a sublease as: "A lease of property from a current tenant rather than from the landlord." The American Heritage Dictionary similarly defines sublet as: "To lease (property) to a third party for a period that is shorter than that of the original lease." In Massachusetts, a sublease is defined as a "demise which is subordinate to a prior lease" and a subtenant is defined as a "tenant whose right to possession by the terms of a sublease is derived from a prior lease."
So, as you can see, those definitions substantively capture the essence of sublease agreements. This is particularly relevant because a number of cases in the Massachusetts Supreme Judicial Court and Massachusetts Appeals Court have gone to great lengths to define and describe a sublease agreement. For example, in the case of Caplan v. Mugar Enterprises the SJC held that a subtenant has no right to possession under a sublease until the sublessor’s (the original tenant’s) right to possession is determined. In fact , a subtenant has no legal right to possession until the sublease is terminated.
Where tenants are subject to a sublet agreement with the lessee for the property, they should be sure to treat their agreements with the subtenant as paramount. This means that the primary lease agreement should not be terminated without addressing the rights of the subtenant. If a property is sold to an incoming buyer or owner – such as a bank or trust and other institutional lenders – typically, and unless otherwise agreed upon, the incoming landlord or purchaser does not have to honor the sublease agreement with the original tenant. The new landlord has the option of terminating the underlying lease and evicting people on the property believed to have rights. Without getting technical as to how the Massachusetts Landlords’ Statutes apply to subtenants or subleases, sufficed to say that the mere fact that a party is a subtenant – and not the original lessee for the property – it does NOT automatically mean that the sublessee can be evicted without a fair amount of due process. Given the complex and oftentimes contentious nature of sublease agreements and sublease documentation, it is strongly advised that you seek professional guidance of a qualified real estate attorney.
Requirements for a Valid Massachusetts Sublease Agreement
While subleasing may not be a common practice in Massachusetts, it is nonetheless regulated by state law. Massachusetts requires that tenants give "reasonable notice" to the landlord if they "convey their interest" in all or part of the rented premises, which includes subleasing to someone else. And notice to the landlord is not merely a friendly suggestion; rather, providing the landlord with a timely notice of intent to sublease is a statutory requirement. Not complying with this requirement can have significant consequences, including the risk of having the sublease declared invalid.
Pursuant to G.L. c. 186, § 15B, the tenant must provide the landlord with 30 days’ written notice of intent to sublease. Statutory compliance with § 15B entitles a tenant to assign or sublet the property so long as the lease does not include a provision that disallows assignment or subleasing. Even an explicit consent provision does not give the landlord the right to unreasonably withhold consent. If the lease is silent on whether the landlord may withhold consent arbitrarily, it implies that the tenant is allowed to sublease and that such sublease is enforceable. A court may issue an order to enforce a purported sublease unless the tenant failed to comply with § 15B or the lease contains an unambiguous prohibition against assignment or subleasing and the landlord did not give reasonable consent. A court will even examine a sublease that contains defects in writing if the tenant has otherwise complied with § 15B and the lease is silent on assignment and subletting. If the requirements of § 15B are not met and no unambiguous sublease prohibition exists in the lease, the sublease will be void and unenforceable even if the landlord did not have good cause to withhold consent.
It is important to note that a landlord may not be liable for damages in some circumstances where a tenant violates the notice provision of § 15B. But the statute does provide that a landlord who suffers a loss as a result of a violation may recover the actual loss or the fair rental value of the premises for the period of violation, whichever is greater.
The law also protects landlords from discrimination by a subtenant. Massachusetts law characterizes commercial leases and medical office leases as a sale of a "service" or "professional" service, which provides that a landlord has the right to discriminate against a potential subtenant without violating any discrimination laws. Of course, if a landlord seeks to discriminate against a subtenant based on a protected class characteristic (such as race or national origin), the law would still apply.
How to Prepare a Sublease Agreement
When a tenant leases out all or a portion of their rented space, they enter into a sublease with the person who is "subleasing" the space or property from the tenant. If the sublease involves commercial real estate, even if the tenant has a lease with a landlord, a separate sublease document should be drafted to protect both the tenant and the subtenant. A Massachusetts Commercial Sublease Agreement can be drafted to include as many of the following items as are relevant to the situation:
- Parties—Begin the agreement by naming the tenant who is subleasing the space and the subtenant. Include the address of the space that is being subleased along with the dates that it will be available to the subtenant from the tenant.
- Identifying the area included in the sublease—It may be that the area being licensed for use is all of the space under the current lease, or it might be that only a room, floor or closet is being offered to the subtenant.
- Dates—It should be clear what the subtenant’s move-in date is and when the sublease will end so it is clear to all parties the exact dates that are covered in the agreement.
- Obtaining the landlord’s consent—Some leases may have a provision that allows the tenant to sublease the space as long as the landlord’s consent is obtained.
- Rent and security deposit—How much will the tenant charge the subtenant for monthly rent and when is it due? Will a security deposit equal to one month’s rent be required? The amount of notice that is required for either party to terminate the agreement.
- Maintenance of the subleased space—Who will be responsible to maintain the premises during the time of the lease? How soon will the tenant be responsible to repair damage to the property after a complaint? When will a property inspection occur and how frequently?
Sublessee and Sublessor Rights and Responsibilities
Sublessees, the parties taking the space up for sublease, have a much lesser right to possession of the premises than do tenants. While sublessees have rights under the sublease, their rights are derived from and are subject to the existing lease. Courts in Massachusetts will afford this obligation the status of an enforceable covenant running with the land (commonly referred to as a "covenant running with the land"), and not just a personal obligation between the tenant and subtenant. The logic is that the sublessor is requiring the tenant to find a subtenant who will pay him rent and is thus contractually demanding that the subtenant be bound by the same obligations that he himself has under the lease. Because the sublessee was bound by the same obligations that the tenant and therefore the original tenant has no duty to that sublessee if something goes wrong during the term because the sublessee is a nonparty to the arrangement and is not treated as a contract creditor. For this reason, sublessors need to be careful to review the sublease to make sure that it does not in effect bind them to the tenant for obligations of which the tenant is not performing, given that those obligations are the original tenant’s duty to the landlord.
The sublessee’s rights are limited to those contained in the sublease. In practice, they should be the same obligations as in the lease, with the exception of the payment of the lease’s rent. That is a provision that would be replaced or superseded by the sublease rental provision. This distinction protects the sublessor. Sublessors do not want to bind themselves to obligations that the tenant may not be complying with, for the obvious reason that they do not want to be responsible to the landlord for those obligations. If they bind themselves to the tenant, an obligation that the original tenant is in breach of, and the sublessor is not performing the obligations, then the landlord will hold the sublessor responsible for those obligations that were not performed.
Covenant running with the land means that the obligation to pay rent always runs with the property or premises and cannot be extinguished. The sublessor is always liable to pay the rent to the prime landlord regardless of whether the sublessee has paid to them the rent. The prime landlord can and will go after the sublessor if the rent is not being paid. In addition, the sublessor is bound to comply with the terms of the prime lease. Therefore, when looking to sublease the premises, the sublessee needs to obtain the permission of the landlord and obtain the landlord’s consent to the sublease. Even if the prime lease says that subletting or subleasing is permitted with the consent of the landlord, the tenant must get the landlord’s consent to sublet or sublease. Without it, the new tenant is in violation of the terms of the lease.
Covenants running with the land are not assumed automatically. Courts will decide if they run with the land by looking at the intent of the court. The court will look at the deeds and the sublease. They want to look and see if the language shows intent to have the provisions run with the land. They look at the duration of the term and again, they will look and see if the duration of the term as a whole is for the intended span of the language it considers as attempting to run with the land.
The sublessor also remains responsible to the landlord for those obligations under the prime lease with the exception of an obligation to pay excess rent over and above what is required by the prime lease. The sublessor may be required to pay the landlord directly for the excess rent if the sublessee does not.
For sublessees:
- The sublessee has the right to enforce the covenants in the prime lease, but not in his own favor. The subtenant, for example, may not compel the sublessor to perform, nor enjoy an action for the sublessor’s breach.
- There is no cause of action against the sublessor for economic loss suffered by the sublessor in consequence of the non-performance of the prime tenant.
- Sublessee does have the right to any action against the sublessor for breach of contract.
- Sublessor cannot sue a sublessee for breach of an obligation that was not in the prime lease, and where the sublessee has not specifically agreed to assume such an obligation in the sublease agreement.
- Sublessee may not challenge a rent increase imposed by the prime landlord, because the subrock has the primary and not the subroads to sue the landlord over such issues.
Subtenants, the party granting the space up for lease, are privy to the relationship between the sublessor and sublessee. The sublessor is the sublessee’s landlord. Thus, the sublessor has an interest in his tenant performing the lease obligations. Sublessors will gain no contractual standing, and thus they will have no claims against the prime tenant in the event of a default or other issues in the primary lease.
Common Issues In Massachusetts Subleasing
Like any legal arrangement, subleasing presents its own set of issues, and being aware of them can save tenants, landlords (or sub-lessors), and sub-lessees a great deal of time and money. For residential leases, common problems include unexpected pushes for rent increases, damage to property, and disagreements among parties.
There’s a great incentive for tenants to sublet their apartments rather than pay for the rest of their lease term. However, many landlords will not know about the sublease unless you make an effort to tell them, as most leases require something along the lines of "the tenant must notify the landlord before subletting." When you apply for your new place, your landlord can show you your rights under the Massachusetts regulations, but many landlords will choose not to do so, so they may be quite strict in their enforcement when surprises arise.
As was alluded to above, landlords have a vested interest in knowing about sublease arrangements, especially if they might have negative effects. Some Massachusetts landlords do not want anybody else living in the unit they rent to a tenant because the occupants may have more visitors . The landlord would then have to try to collect back rent for missing occupants, and that process may be lengthy. Further they may have concerns about wear and tear on the physical property.
Other potential issues are related to choosing the right tenants. Even within your family and friends, it can be hard to find someone who will pay the rent in full and on time. They may pay for a month or two but eventually come up with excuses, and they don’t become legally responsible for any damages in the worst-case scenario. If a tenant is ever at risk of eviction, the tenant’s credit history can change, and the subtenant may not be able to pay.
Having a written sublease agreement is the best way to ensure both parties have a record of their rights and obligations under each other’s control. Some landlords have a specific form that they use for this type of agreement. If you don’t have a standard form, you can make one up based on your lease agreement; keep it short and simple. It may not be required, but by using a conventional format, you can include the right details that help you avoid disputes by accounting for the biggest issues likely to arise.
Ending a Sublease Agreement
There are several conditions under which a Massachusetts tenant may legally terminate a sublease agreement. These conditions include;
- If the tenant is legally entitled to terminate the primary lease;
- If the conditions of the lease or this law have been broken by the sub-tenant;
- If the tenant wishes to terminate the agreement for breach, the landlord also must have breached the primary lease.
- If the expiration date on the sublease has arrived, no action is required.
- When the tenant has violated the primary lease agreement, and the sub-tenant is aware of this fact, yet still chooses to follow through with the sublease agreement, the landlord is within his or her rights to terminate the agreement.
Termination of a sublease agreement requires a 30-day written notice of termination by the landlord. When this notice is served, the tenant or subtenant is expected to leave the premises.
The notice of eviction requires the following components;
- The form of eviction that is requested;
- The date the subtenant is required to vacate the premises;
- The reason for eviction;
- The section of the law under which the tenant may be evicted.
In the event that a tenant fails to vacate the subleased premises, an eviction lawsuit may be filed with the district courtroom. The tenant has 7 days to respond to his/her eviction letter. If the tenant does not respond during this time, a default judgment will be made against him or her permitting his or her eviction.
How to Sublease a Property Successfully in Massachusetts
As a tenant, part of being a good sublessor is ensuring your own understanding of the rules and your rights and responsibilities. Below are some tips for successfully managing and executing a sublease in Massachusetts:
Tip #1: Review the Original Lease
Look for any mention of subleasing in your original lease. Sometimes, the original landlord has included in the lease a prohibition on subleasing. If prohibited, that may limit your options.
Tip #2: Obtain Consent
If your original lease makes no mention of subleasing and does not prohibit it, then most likely you have no obligation to get permission from the landlord to sublease to the new tenant.
However, sometimes the landlord will expect you to notify him or her before subleasing the property. The landlord may want to approve the new tenant. While the notification is not necessarily required by law , it is probably a good idea from a practical perspective.
In that case, at a minimum, before entering into a sublease, you should provide written notice and be open to being responsive to landlord requests for approval in a timely manner. If the tenant is a corporation, you should provide the landlord with corporate information, personal guarantees, and/or a credit application, if requested. Having this information on hand will allow the process to move quickly when an interested third-party tenant comes forward.
Tip #3: Security Deposit Tips
If you are planning to take a security deposit from the new tenant, keep in mind that there are rules for collecting, holding, using, and returning any security deposit received. The amount of security deposit you may collect will depend on the property being leased, and you should consult with an attorney to determine the proper amount you can charge.