What’s the difference between a sublet and an assignment?
With both a sublet and a lease assignment, the departing tenant remains responsible for the rent unless a landlord explicitly releases you.
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When Ismail Mustafa, a tenant in Dumbo, wanted to break his lease recently, the landlord gave him three options: He could arrange a sublet, transfer the lease to someone else, or end the lease by paying two months of rent upfront.
There’s obviously a financial cost to paying two months rent as a penalty for breaking your lease but it is also the most clear-cut break with your landlord. If you're considering the same options as Mustafa, it's important to know the difference between transferring your lease to someone else (also known as an assignment) and subletting. Neither are without risk.
"The bottom line is—none of the options is perfect—each has advantages and disadvantages," says attorney Steven Kirkpatrick, a partner at the law firm Romer Debbas.
It's worth pointing out that a fourth option might be offered to you: To move out and pay rent until the landlord finds a tenant. This is highly "problematic," says Catherine Grad, a tenant attorney with her own practice. "You no longer have control over the process and you are still on the hook for the rent and you’ve given the power to someone who’s incentive is less than yours."
Subletting vs. assignment
When you sublet your place it's typically because you intend to return to the apartment. A sublet will usually end a week—but it could be just a day—before the actual end of your original lease.
Subletting for the entire length of the lease is an assignment. An assignment allows you to hand off the rental to a new tenant for the rest of the lease term. This is what Mustafa ended up doing. What's important is that either way—with both a sublet and an assignment—you are giving up your rights to the rental but in both scenarios you are often still liable if there is damage to the apartment or the next tenant fails to pay. The risks are "tremendous," Grad says.
When you assign a lease, the person you are assigning to would pay the landlord directly and deal with the landlord for repairs.
If you are subletting you stand in the shoes of the landlord. The subtenant pays you the rent and you then pay the landlord. "If there are problems in the apartment, it is your duty to get it fixed," Grad says. This is the case, even if you are not authorized to make the repairs. So while a sublet and an assignment are technically different, in terms of the risk for the departing tenant, Grad says, "it is the same."
"The fact that you assign your rights does not eliminate your obligation to pay," Kirkpatrick says.
The only situation in which you wouldn't be responsible for the apartment in any way is if you were released by the landlord from your original lease in writing. In practical terms, Grad says, "you will never get that with a sublease but might get it for an assignment. The landlord has no incentive to give that to you. Why not have two people on the hook—both you and assignee?" she asks.
A payment or additional security might be the incentive a landlord needs to release you. Security deposits are capped at one months rent making this type of payment "problematic," says Kirkpatrick but he adds there might be ways to structure it as a quid pro quo to release you of liability.
Negotiations around lease breaks
A landlord cannot unreasonably deny your request to sublet or assign a lease in a residential situation. If your landlord isn’t responding to your request to assign the lease, that silence becomes default consent within 30 days of you alerting them or of them receiving any additional information about the arrangement. If a landlord's refusal to assign is unreasonable, that terminates your lease.
If the refusal is unreasonable for a sublet, you aren't released from the lease but you are able to sublet the apartment and can fight it out in court.
Grad says seeking to sublet or to assign your lease often leads to discussions about lease termination. Landlords know they cannot unreasonably deny your request but they also entered an agreement with you and want you to pay up. Yes, the landlord has a duty to mitigate—which means they must do all they can to find a replacement tenant if you want to break your lease—but as Grad points out, this benefit isn't a given.
"You have to fight for it—that's the nature of legal rights. It doesn’t mean you have a right to break your lease, it just gives you a defense when you get sued for all the rent," she says.
Insurance considerations
Without release from your own lease you will want to set up a separate agreement with the incoming tenant. Kirkpatrick advises having an indemnification agreement although points out that for practical purposes if the person stops paying the rent, there are no guarantees they will still be able to pay you. "If it were me, I’d want a guarantor," Kirkpatrick says.
To protect yourself, run a credit report on a prospective subtenant or assignee. Phil Horigan, founder of Leasebreak, a website where you can find renters to take over an unwanted lease tells Brick, "in most cases I have heard where a tenant has gotten burned by a sublet, the tenant did not run credit."
You also need to make sure the subtenant or assignee has apartment insurance and that you too have apartment insurance, Grad says. If your landlord has not released you from the lease you remain liable if the tenant, for example, floods the apartment below or there's a fire in the place.
You also want your tenant to know you are not covering their contents or liability. Jeffrey Schneider, president of Gotham Brokerage (a Brick Underground sponsor) says, "there are various ways to cover this, depending on whether you are an owner or former tenant."
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