What Is Subletting?
When tenants move into a property they each sign a Tenancy Agreement with the landlord/property management company.
If tenants decide to rent their leased property to another individual while only their own names are on the Tenancy Agreement, then they have sublet that property. The signed tenants remain legally responsible to the landlord whether they remain in the property or not.
Subletting can happen for a variety of reasons. Sometimes tenants are technically subletting their rental without realising it, e.g. they help a friend or family member by having them come to stay for what becomes an extended time while receiving contributions towards the rent.
Usually subletting is because the tenant is moving out of the rental, e.g. they may need to move before their lease ends, or they may have to leave the area for a period of time but want to be able to return, so they on-rent the house to someone else. This way they save (or even make a profit) without losing their tenancy. In other instances a tenant may sublet by remaining there, but give up part of their rental property so that someone else has exclusive use of that part for a period of time, whilst charging for it.
It‘s illegal to sublet, unless the landlord has given specific permission. A new tenancy agreement is then required and the original tenant becomes a landlord to the person they sublet to. The original tenant remains as such under their original tenancy agreement, regardless of whether they live on the property or not.
Why Is Subletting A Problem?
It doesn’t need to be. In some circumstances, as long as the owner is aware and in agreement with a subletting arrangement, it can benefit everyone involved, particularly if it prevents the property being unoccupied for weeks at a time during a long term renter’s absence.
However the property owner does want to know who’s living in their premises. If they have not been consulted then they haven’t had the opportunity to have those guests vetted properly, and don’t have the legal protection of a signed agreement. For property investors this puts their investment at higher risk, and in particular they may not be covered by their insurance for any damages that may occur. A sublet guest may jeopardise otherwise good relationships with neighbours and there are future risks involved with security when keys are being shared.
With NZ’s present housing crisis people from all walks of life are increasingly desperate for a home in which to live, or to find a means to save to buy their own home. There are growing concerns amongst investors that their rentals are being sublet online to people they don’t know. The popularity and ease with which people can get tenants online via rental platforms such as Air BnB can be a real problem for landlords, particularly during the holiday season.
In 2019 a tenant; Zain Syed, was found guilty of pocketing more than $60,000 by sub-letting his Auckland rental to homeless people, and the Tenancy Tribunal ruled against Jian Cui & Ma Dong for subletting their rental apartment on Airbnb and Booking.com.
How Can It Be Prevented?
So that a landlord remains protected under the Residential Tenancies Act, it’s advisable to ensure your tenancy agreement includes clauses that state:
a maximum number of people are permitted to reside in the rental (this can help limit a tenant having a guest stay a long time)
the rental is to be used primarily for residential purposes
individual rooms are prevented from being sublet, rather than referring to subletting of the property as a whole.
subletting on Airbnb and other temporary rentals platforms is prevented without the landlords written consent
each individual tenant is to sign, thereby making each person responsible, and stating if the tenant is under 18 years of age.
It’s also important to maintain regular property inspections because this is another way by which you can ensure all conditions of the property agreement are being met.
Even if the tenancy agreement does not forbid subletting, the tenant must still get the landlord's written consent to sublet the house, or part of it, to someone else. With all these bases covered it’s then up to you if you’re open to a tenant approaching you regarding subletting on a case-by-case basis.
What Do I Do If I Suspect A Tenant Is Subletting?
Firstly get evidence – Look online to see if your property is listed elsewhere like Airbnb or any other rental platform. Make a record of the details and get screenshots.
Secondly with breach of their signed tenancy agreement with you, you have the backing of the Residential Tenancies Act 1986. Send a written 14-days Notice to Remedy and put it in their letterbox, deliver in person, or send by email, or fax. This gives your tenant a minimum of 14 days to fix their breach (evict their sublet guest). If you prefer, you can give your tenant a longer period of time to fix the issue.
If the breach is not fixed within the time period, you can apply to the Tenancy Tribunal to sort it out for you, including compensation if relevant.
This is yet another reason why the services of an experienced property manager are invaluable, because they significantly reduce the likelihood of subletting and its resulting hassles. We can help you!