Subleasing is an arrangement which involves an existing tenant renting out their rented space to a new tenant, known as the sublessee. This new tenant either shares the space with the original tenant or takes over the lease entirely. The sublessee pays their portion of the rent directly to the original tenant, who in turn continues to fulfil their rent obligation to the landlord as per the terms of the original lease. However, whether subleasing is allowable hinges on the clauses outlined in the original lease agreement, with landlord permission often being a prerequisite. In cases where subleasing is allowed, the primary tenant remains accountable for rental payment to the landlord, regardless of the sublessee's contributions. Additionally, any damage attributable to the sublessee also falls under the primary tenant's responsibility.
Mechanics of Subleasing
When a property owner leases to a tenant, an inherent clause within the lease legally conveys the right to possess and use the property for a specified duration. This grant establishes the legal rights for the tenant. Nevertheless, situations might arise where the tenant cannot fully occupy the rented property for the entire lease duration, perhaps due to a prolonged overseas business trip. This is where the concept of subleasing comes into play, as the primary tenant considers subleasing to ensure rent coverage during their absence.
Subleasing transpires when a tenant partially or completely assigns their tenancy to a third party, who then becomes the new tenant. This is permissible only if explicitly allowed in the lease agreement, with landlord notification and approval required.
It is crucial to note that subleasing does not absolve the primary tenant from the obligations stipulated in the original lease. They remain responsible for rent payment and property maintenance, even if the sublessee causes damage. Conversely, the sublessee is accountable to the primary tenant for rent payment.
Distinguishing Sublease from Sublet
Although often used interchangeably, "sublease" and "sublet" exhibit subtle distinctions in rental or lease contexts. Both pertain to renting out property to a new tenant. However, the crux of the disparity lies in the role of the primary tenant. In a sublease, the original tenant is actively involved in leasing the property to the new tenant and signs the subsequent agreement. Rent from the sublessee goes to the primary tenant, who then pays the landlord as per the original lease.
Subletting, on the other hand, involves the new tenant directly dealing with the landlord, bypassing the primary tenant. This arrangement entails the landlord creating a new rental agreement and the new tenant paying rent directly to the landlord.
Subleasing in Singapore
Subleasing is legal in Singapore but only for private properties. Subleasing HDB flats (public housing) is prohibited. If considering subleasing a rented property, it is crucial to ascertain that the tenancy agreement allows for it and to seek the landlord's consent. Adherence to rules and regulations related to subleasing is also imperative. In Singapore, the minimum sublease period for private residences is three consecutive months, with an occupancy cap of six unrelated individuals in each unit.
Read also: What is Tenancy in Common?
Airbnb Considerations in Singapore
While Airbnb is not against the law in Singapore, navigating its regulations can be intricate, especially for tenants. Often appealing for short-term passive income, Airbnb typically targets tourists seeking temporary lodging. Yet, the minimum lease period for private residences remains three months, and thus are not suited to be used as tourist or transient accommodation.
While tenants who rent HDB flats cannot sublease, HDB flat owners who wish to rent out their flat or bedrooms must get HDB's prior approval. A minimum of 6 months' tenancy is required to ensure that HDB flats are not used as transient accommodation.
Subleasing is an avenue to defray rent costs during prolonged absences or to generate passive income as a tenant. However, tenants contemplating subleasing should meticulously study government regulations, consult their tenancy agreement, and secure landlord approval. Each situation is unique, and ensuring compliance with legalities is paramount for a successful and lawful subleasing experience.
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Disclaimer: The information and/or documents contained in this article does not constitute financial advice and is meant for educational purposes. Please consult your financial advisor, accountant, and/or attorney before proceeding with any financial/real estate investments.