Subletting is where a tenant moves out of the house they're renting and on-rents the house to someone else, such as for a residential tenancy or for a short term holiday purpose.
The important thing to understand is that the tenancy of the tenant who moves out continues. This means that the tenant, not the person subletting, is responsible to the landlord.
Subletting requires a new tenancy agreement
When a tenant sublets the house they’re renting, they must sign a written residential tenancy agreement with the person they sublet to. This agreement is subject to all the same rules as a standard tenancy. Where the subletting arrangement is for holiday purposes the Residential Tenancies Act will not apply to that arrangement and a residential tenancy agreement will not be required.
This means that two tenancy agreements are in place for the property at the same time:
- the original agreement between the tenant and the landlord
- the agreement between the tenant and the person they’re subletting to (the sub-tenancy).
The original tenant also becomes a landlord
The tenant on the original tenancy becomes a landlord to the person they sublet to. At the same time, they remain a tenant under their original tenancy agreement, even though they’re no longer living in the house.
That tenant is known as a sub-landlord, and the person they’re subletting to is known as the sub-tenant. The tenant (as the sub-landlord) must meet all the obligations of a landlord under the law and the sub-tenant must meet all the obligations of a tenant under the law.
Even though the original tenant no longer lives in the house, they still have to meet all their obligations as a tenant under their tenancy agreement with the landlord. This means they must make sure the rent’s paid and the house is looked after and kept reasonably clean and tidy. If the rent’s not paid, the landlord will come to the tenant to seek the missed payment.
Your key rights and responsibilities explains the obligations of both landlords and tenants.
The tenant must have the landlord’s permission to sublet
A tenant is not allowed to sublet the house they’re renting if their tenancy agreement has a clause that forbids them from doing so. If the tenancy agreement doesn’t forbid them from subletting, the tenant must still have the landlord’s written consent to sublet the house to someone else.
The landlord must not unreasonably withhold their consent and must not attach unreasonable conditions to their consent. If they do, the tenant may apply to the Tenancy Tribunal to approve the subletting of the house or to end the tenancy.
A tenant commits an unlawful act if they sublet or otherwise part with possession of the property without the landlord’s written consent and may be liable for a financial penalty of up to $1,000, and may also be liable to pay compensation to the landlord.
Where a landlord has not consented to a sub-tenancy, upon the original tenancy ending, any sub-tenancy will also come to an end.
Subletting for business purposes, such as holiday accommodation, should be carefully considered by both landlord and tenant as it may cause insurance problems. Speak with your insurers and each other about insurance cover issues.
When the original tenancy ends
If the landlord gives notice to the tenant to end the original tenancy, the landlord can, at the same time, give the same notice to the sub-tenant to end the sub-tenancy.
If the landlord does not give the sub-tenant notice, the sub-tenancy will continue after the head tenancy ends. Once the head tenancy ends, the tenant will stop being the sub-landlord. The landlord (owner or property manager) will take over as landlord of the sub-tenancy.
Assignment is an alternative to subletting
Assignment is where a tenant finds someone to replace them in the tenancy. The person who replaces the tenant takes over all the tenant’s responsibilities under the tenancy agreement.
Change of tenant has more about assignment.