Introduction to Chicago Subleasing
On a basic level, subleasing means that the tenant who has possession of a property exists in the "middle" of the chain of potential tenant-landlord relationships. You have person A who has a lease with a property owner. That person then leases out part of the property to person B, who then has an agreement with person C. A sublease is an agreement in which the original lessee (A) provides a sub-tenant with a right to inhabit the dwelling under a different set of terms and conditions than those contained in the original lease. The person who is subletting (B) is often referred to as the "sub-lessor."
Now, if you see the word "sublessor" and you are thinking that you may be treated differently in Illinois than you might be for an apartment in Massachusetts or Michigan – you are thinking smartly. Illinois courts have not applied the common law definition to the state’s landlord-tenant relationship. Here, the nature of the agreement between the parties determines whether one variegation of the lease exists in the midst of another.
The actual relationship between the tenant and landlord is governed by the terms of the lease. If the tenant leases a property to someone else without notice to the landlord or fails to obtain his consent to the subleasing agreement , the tenant may be in violation of the lease because he is "subletting" the property. Illinois does not recognize the "duty to mitigate doctrine" which comes from the common law where landlords are required to mitigate damages, should a tenant decide to sublet without the landlord’s consent. In Illinois, the tenant or lessee who intends to sublet is responsible for providing notice of the intent to sublease the property to the landlord, absent a provision in the lease granting permission to sublease.
In the absence of any prior restrictions in the original lease, then the tenant can sublet without violating the lease and the landlord will face difficulties trying to evict the subtenant. However, the tenant should still provide notice to the landlord and also ensure that the subtenancy does not violate the laws of public policy. For instance, if the original lease states that pets are not permitted but the tenant wants to sublease to a tenant who has a pet, the tenant cannot sublet to that person.
A lease may address subletting in many different ways, with different implications. When a property owner or landlord creates a lease, some of the most important aspects of the structuring of the tenant-landlord relationship will be explained. The lease may specifically address subleasing, which could vary from whether the tenant is allowed to sublease the property to requiring the tenant to pay a fee if a sub-tenancy is established.
Key Components of a Sublease Agreement
Sublease contracts vary from one lease to another, but they all cover the same basic terms. To avoid confusion and disputes, sublessors and sublessees must understand the following three elements:
Duration
The duration of the sublease must match the lease term. This means that the sublease cannot extend past the lease. The sublessor is still bound to the terms, so if a sublessor subleases the property to a new tenant for one year, that sublease will end at the same time as the original lease.
Responsibilities
All obligations from the lease carry over to the sublessee. However, the tenant is still responsible for rent, damages and other problems. Sublessors should make every effort to enforce all rules from the lease. If the original tenant allows someone else to violate the lease, he or she still may be subject to penalties.
Consent
If a sublessor wants to sublease a property, the sublessee must obtain written permission from the landlord. Some landlords charge a fee for the paperwork. However, the landlord cannot unreasonably withhold consent. In some cases, for example, sublessors may prove that the landlord was being unreasonable. A good example is a case where the new tenant came in at the sublessor’s request. But this example also includes a twist. Generally speaking, the landlord is being unreasonable if he or she does not set for requirements of eligibility. When a landlord does set forth these terms, it might be easier for someone to obtain a lease than it would have been without any requirements. Requiring personal references, financial documents and even access to credit reports are some of the terms that help landlords choose ideal tenants.
Legal Obligations and Duties
Both parties should remain mindful of their obligations under state law once the sublease is in place. To the extent that the sublease confers rights on the parties, those rights are governed by the particular terms set forth in the sublease itself. For example, Chicago landlords may not unreasonably refuse consent to sublet, but it is therefore also within a landlord’s rights to withhold consent for unreasonable reasons. To the extent that there is anything in the lease that states that consent cannot be unreasonably withheld, a landlord can still refuse consent to sublet for any reason at all.
In addition, Chicago law requires that a landlord continue to comply with city ordinances covering maintenance. This means that even if a tenant is subleasing to a tenant who has signed a lease between themselves, Chicago ordinances still apply to the tenant with respect to any imposed maintenance requirements. This would include the provision of heat, for example.
Chicago law provides recent subtenants with substantial protections. A tenant who sublets without the landlord’s permission, for example, is still protected from eviction proceedings as long as the lease does not carry an express prohibition on such subleasing. Finally, to the extent that it is permitted in the lease, the tenant’s rights to sublet a lease are likely assignable. These rights must be given to a trustee if the tenant goes into bankruptcy.
Advantages and Disadvantages of Subleasing in Chicago
Subleasing in Chicago, like any real estate decision, has its pros and cons. Dimovski & DeFallos believe that property issues should never boil down to black and white – every decision requires an objective analysis and consideration of your unique circumstances. Our attorneys have helped a wide variety of clients with subleases and other property transactions, and understand that no two situations are alike. As such, we’ll consider both the advantages and disadvantages of subleasing a Chicago property.
Pros:
You might get a better deal – the longer you sublease, in many cases, the better deal you get. For example, if the market has softened since that price-conscious landlord first set the rental price, subleasing might result in a fairer deal for you.
Flexibility – subleasing means that you can keep your options open and remain nimble. Should a better opportunity present itself in the future, it’s easier to switch locations if you’re in a flexible sublease rather than a lease with set departure terms.
Ease of process – unlike a regular sale, subleasing often allows you to sign a tenancy agreement without requiring extensive negotiations, court dates, or other considerations.
Financial gain – subleasing might be used as a strategy to save money. For example, the sublease holder might agree to a regular sum every month in exchange for pool access. While the subleasing party is paying their monthly rent, they’re also getting a way to enjoy a pool for a fraction of the usual cost.
Cons:
Legal risks – eviction rules and clearance times for a sublease are often different than those for a regular lease, meaning that an evicted tenant cannot evict a sub-subtenant. You risk losing a fair amount of time when evicting sub-subtenants.
Financial risks – if your sublease includes some kind of utility agreement, the subtenant could be forced to pay more than originally agreed into their bill.
Pressure to renew – if the business is doing well in the subleased property, you could be pressured to renew the lease before you’re ready.
Risk to privacy – sometimes, subleasing parties can be a bit too friendly. When you leave the main tenant in charge of the property, they might not respect your privacy.
How to Properly Sublease Your Apartment
Listing Your Apartment: The first step is to market your apartment for potential subtenants. There are many platforms available for both homeowners and renters looking for or offering subleases. First, check with your landlord to see if they have a platform for this. Additionally, there are major websites that focus on short term subleases, including Airbnb and Homeaway.
Finding A Subtenant: For prospective subtenants looking for a month to month place to live, you may have to perform some due diligence to find a suitable candidate. Most major companies will run background checks and likely don’t want you to transfer the lease to someone they haven’t vetted. If you need to find a new tenant promptly, you should list the apartment on various sites, such as Craigslist or Padmapper. You’ll want to conduct your own basic background check, asking for both wage and credit statements. Once you feel you’ve found an adequate candidate, you can plan for the next steps.
Drafting Your Sublease: For our purposes, we’ll use the word "subtenant" to refer to the person taking over our lease temporarily , no matter if it is to be a sublease or assignment. The subtenant and sublessor (the person wanting to sublease) may sign a new lease or, if they desire to keep the original term, have an addendum to the existing lease. You’ll need to provide your subtenant with your original lease, as well as a form asking for their signature, permission, etc. If you need the apartment cleaned, you’ll need to contact the cleaning service separately once the sublease is signed. If you need any maintenance performed, you will have to reach out to your building’s maintenance department or contact the landlord directly if you experience any issues.
Final Approval: As described above, one of your first steps should be to ask the landlord if you can sublet your apartment. This is also known as a layover clause. Without this clause, your tenant may not be able to sublet the apartment and it could become a breach of lease agreement. Once you obtain a reply that you can sublet your apartment, show your lease to the person you selected. Once the subtenant has signed the sublease, ask your landlord for final approval.
Common Pitfalls and How to Avoid Them
Subleasing in Chicago can lead to a variety of disputes. Property owners and tenants alike, as well as the subtenants, can face significant legal hurdles that can be tedious and costly to settle.
Eviction
Even if you have to evict a residential tenant for not paying rent, you will be forced to go through the proper channels to remove the tenant. Landlords often try to evict tenants immediately after a lease is up but this is not possible in most cases. Knowing how to legally evict a tenant can help lease holders avoid costly errors that land them in court.
Suit to Quiet Title
If a tenant believes that they have a right to the property, even though there is a signed contract between the landlord and a third-party tenant, they may pose a legal challenge to the tenant. A suit to quiet title can be filed to void their claim and free up the property for sale or other use.
Failure to Mitigate
Both landlords and subtenants to whom property is leased can be found at fault if they do not take active measures to prevent damage to the property or to stop the spread of a tenant’s default to other tenants. Failure to deal promptly with important issues such as issues with rent payment or conduct, missing payments, or problems concerning health or safety issues can lead to a number of costly complaints and lawsuits. In addition, if a landlord rents out a space with what is considered too little square footage, a tenant may be able to sue the landlord for the extra rent that they have paid in full or in part.
Breach of Contract
If either the landlord or the tenant(s) have broken the terms of the lease, the other party may have legal grounds for filing a lawsuit. Any breach of the lease stipulations or the conduct of either party can be grounds for filing suit.
Mitigating Damages
The property owners and tenants involved in the sublease contract should work together according to the law to curb the costs associated with the damages. They will work to find a solution that will be legally sound and restore the end of the sublease in a prompt and legally acceptable manner.
Legal Assistance and Resources in Chicago
For those seeking further assistance in drafting or understanding a Chicago sublease contract, the Chicago Bar Association operates a Lawyer Referral Service that can be reached at (312) 554-2001. Though this service does not provide free legal assistance, the lawyer associations do recommend that prospective clients seek to gain a consultation for no more than $25 . In addition to the counsel of legal professionals, there are many tenants’ unions and other advocacy groups that specialize in helping renters understand their rights, especially in a city like Chicago, where certain rules and regulations govern subletting in neighborhoods like Lincoln Park and Wicker Park.
Groups such as the Chicago Tenants Union, the Rogers Park Tenant Union, and the Alliance of Tenant Tenants are all non-profit organizations dedicated to tenant rights, and can help you navigate the procedural steps involved in the subletting process.