New Jersey Sublease Agreements: What They Are
A sublease is a legally binding agreement between the landlord and a current tenant who is renting the property. With a sublease agreement, the tenant will still be remaining on the hook for all obligations named in the original lease, which means that they will be continuing to maintain their responsibilities for rent. The subtenant will have their own responsibilities though and owe rent to the tenant. Each of the agreements will state how long the rental period will last, and there are no legal or lasting obligations between the subtenant and landlord.
As there is a sublease agreement in the first place , it should be noted that sublease agreements are specific situations. They detail how the tenant will be able to rent the entire or a partial amount of the premises from the tenant. This shared occupancy arrangement allows all involved parties to have their best interests protected no matter what happens.
As for what a sublease is not, the tenant still has to be responsible for the original lease in the Payment of Rent provision. However, the tenant does have to continue paying rent to the landlord, which means that if the subtenant fails to pay the rent when they are supposed to, it can be relayed back onto the tenant. It should also be noted that a sublease agreement differs from a lease in that it may involve a partial lease of the rental space to the subtenant. The important purpose of the sublease is to give the original tenant a way to get out of the apartment by having the subtenant take over.
The Legal Parameters of Subleasing in New Jersey
A sublease is a two-step rental agreement to persons other than the party that originally leased the property from the landlord or owner. The "sublessor" is the person who leases the property of the owner, and the "sublessee" is the person to whom the sublease is granted.
New Jersey law regulates residential subleases, and most residential lease and rental agreements in New Jersey contain specific provisions regarding subletting the premises.
Both original tenants and subtenants have certain rights and remedies under New Jersey residential subleasing laws. For example, if a landlord does not give permission for a proposed sublet that’s permitted under the residential lease agreement, original tenants are entitled to actual damages and attorney fees if they prevail in a lawsuit against the landlord. Normally, reordering the terms of the original lease would be the landlord’s only remedy, and there is no statutory remedy that permits the original tenant to cancel the lease and leave the original premises without any liabilities under the lease.
Whether or not the original tenant has the right to profit from the rental payments a subtenant pays on the premises, however, is a different story. A tenant may be able to profit from the sublease under the following conditions:
If permitted under the lease or if the landlord consents to subletting, the subtenant may not be required to pay rent in excess of the rent owed by the original tenant to the landlord under the original lease agreement.
Steps for Drafting a Sublease Agreement
In the vast majority of cases, especially for residential or long-term commercial spaces, any New Jersey sublease agreement must be in writing. As a starting point and even for more complicated leases, a sublease agreement template can be used and customized for use in New Jersey. To start your New Jersey sublease agreement, you need to complete the following steps:
- Write the date where the sublease agreement commences and is signed.
- Indicate the names of the original landlord (and business name if applicable), tenant and subtenant. Specify that the original landlord and tenant have an existing lease agreement and that the subtenant is hereby subletting the original tenant’s premises. The address of the original tenant’s premises should be included here.
- Define the premises and state what is being excluded from the lease. Here you will include a detailed description of the premises and specify that this sublease agreement is just between the subtenant and the original tenant and has no effect on the landlord/tenant relationship. Any of the following or similar instrument may be included here: blueprints, plans, surveys, sketches, design development drawings, specifications, drawings, floor plans and elevations. Where the parties would like to describe the gracious rights of the commercial real property, a survey might be included.
- Specify the length of the sublease agreement. Here it is not necessary to include the length of the original lease agreement. For a residential property, it is customary to provide 1 year for a standard residential lease agreement.
- Indicate the rent. Here you will provide the length of time the sublease agreement will be in place and the amount of rent per month, as well as when it is due. The maintenance charges, taxes and insurance and other costs of the premises may not be included in the rent.
- Insurance. Here you should make sure that the parties to the sublease agreement have already agreed to who is responsible for the insurance. If not, the following provisions should be made here: that the tenant is responsible for the cost of insurance of the leasing real property; that the tenant will hold the original landlord harmless for the cost of insurance; and/or that all insurance proceeds will belong to the tenant and not the landlord.
- Improvements and modifications. Make clear who is responsible for making up the space for sublet and making any changes or improvements needed. If the parties plan to allow a partner to come to the sublet or to assign the sublet, this should be specified here as well.
- Responsibilities. Outline each party’s responsibilities in a clear and concise manner.
Although it may seem like a simple task, writing a New Jersey sublease agreement can be very complicated and the parties may not be aware of all the issues involved. It is advisable to consult with an experienced New Jersey real estate attorney that is familiar with writing a sublease agreement.
Typical Terms Found in NJ Sublease Agreements
Any New Jersey sublease, like any New Jersey commercial lease agreement, contains a number of important clauses that both the landlord and tenant should pay careful attention to and understand. The clauses listed below are among the most common found in New Jersey sublease agreements.
The Term
This clause of the sublease agreement describes the length of time that the subtenant intends on leasing the property from the landlord. The length of term may be similar to the length of the original lease between the landlord and the tenant or could potentially be for a different length of time. This clause is very important from the perspective of both the landlord and the tenant. Depending on how the term of sublease is described the duration may be set in stone or may be flexible depending on whether the term is described as an "initial", "primary", or "fixed" term, etc. For example, if the primary term of the sublease expires before the lease between the tenant and landlord terminates this clause should clearly describe when the tenant plans on vacating the property, so that the landlord can adequately plan for when the subtenant will leave.
Permitted Use
This clause of the sublease agreement describes what the tenant will be using the premises for while the tenant occupies the property with the subtenant. Is the tenant going to be using the property for storage? For manufacturing? For retail? This description should be made clear and adapted to the uses allowed under the original lease agreement.
Rent
Typically, the rent provisions of the sublease agreement will refer to the actual lease agreement between the landlord and the tenant and a monthly rent will be paid from the subtenant to the tenant. In New Jersey, it is rare for a subtenant to pay rent directly to the landlord, though there are some exceptions. Any variations from the original lease agreement should be specifically addressed in the monthly rent clause to avoid any confusion between the parties of the sublease agreement.
Pros and Cons to Subleasing a Property
Many of the benefits of the original lease apply to the sublease. The tenant subleasing the property is obligated to pay rent to the prime tenant. This may be beneficial to, and benefit the sublessor if he is forced to leave the premises. If sublessor was subject to a rent increase or property tax increase, the sublessee would be subject to these increases as well. Sublessor is entitled to payment from sublessee before sublessee is entitled to possession. If sublessor is found liable to the landlord, the landlord may have to show that sublessor was at fault to recover from sublessor. Sublesssee is bound to the sublease and could be forced to abide by its obligations. As sublessor has likely lost his right of occupancy, he would likely also be entitled to a portion of the security deposit. Any improvement to the property would be owned by sublessor. Sublessor may be entitled to compensation for the appreciation of any realty. While sublessor should be liable for all costs of his own actions, it is not automatic. A sublessor must disclose the sublease to the landlord but may be entitled to a release from liability for breaches of any landlord-tenant agreement after disclosure.
While they are many of the same benefits to a sublease, both parties are also at risk from this transaction. Sublessor may have significant liability to the prime tenant in terms of negligence, the use of the subleased property, taxes, utilities, rents, and property management under the prime lease . A sublessor may be liable for a sublessee’s improvement to the property. Sublessor may be forced to pay property tax and water usage fees if the prime lease so requires. Once under a sublease, the parties rights and obligations are dictated by the sublease, not the prime lease or landlord-tenant relationship. The subplessor’s rights are additionally limited to those imposed by the landlord.
Sublessor will likely be liable for any unauthorized use and any unauthorized assignment or subletting.
The original or prime tenant would likely be responsible for any damages and breach of the sublease. The prime tenant may have the ability to evict the sublessor. The sublessor would also be subject to eviction by the landlord. Where the landlord prescribes a remedy for failure to pay rent or obligation, the sublessor may be subject to eviction within 3 days.
Both parties to the sublease are likely to be liable for any of their individual actions. The sublessor may be liable for the sublessee’s actions by virtue of being lessor. The sublessee may be liable for the sublessor’s action by virtue of being sublessee. In case of severed tenancy or landlord’s eviction, other parties may be unchanged.
These are just a few things to consider when entering into a sublease. Finding the right sublease for your situation may require the assistance of an attorney.
Dispute Resolution in Sublease Agreements
Given the concerning frequency of disputes arising as a result of sublease agreements in New Jersey, it is important for both the original tenant and the new tenant to be aware of the types of conflicts that can arise and how best to resolve them.
Sublease conflicts typically arise over issues involving rent payment, lease terms and termination requirements. Since many subleases are executed during a tenant’s last year of occupancy, with the explicit intent of allowing the new tenant to take over the space at the end of the lease term, failure to make rent payments and other minor issues often result in conflicts between the original lessor and the new tenant. Disputes can also arise from the original landlord’s reevaluation of the property and desire to change the lease terms.
Disputes can easily become complicated, but there are ways to prevent, as well as resolve, them. Often, there are existing disputes with respect to who should be held accountable for damages to the property, and both the original landlord and the tenant are hesitant to place blame on the photographer or event planner, who may have caused the damage or other problems. You may also be concerned about your liability, especially if the dispute involves injuries sustained by an event attendee and damage claims are filed.
Aside from the usual litigation process, alternative dispute resolution (ADR) measures are available to resolve sublease disputes in New Jersey. Alternative dispute resolution is any means of settling disputes outside of the courtroom. The New Jersey Department of Community Affairs provides ADR for residential and tenant-landlord disputes statewide; the ADR process allows a private volunteer to negotiate solutions to the dispute with the parties, using submitting a written agreement that can be turned to the court and enforced.
The two types of alternative dispute resolution are mediation and arbitration. Mediation allows you to bring your concerns to a third-party mediator, who will talk with both parties and facilitate a discussion about the best way to resolve the problem. The outcome is not legally binding, but it can be a good way to achieve a result quickly and inexpensively.
For more serious matters or when the dispute is likely headed to trial, you may want to engage in an arbitration process. With arbitration, the parties agree to submit their case to a qualified third party, who will make all of the decisions (like a private bench trial). The decision made in arbitration is legally binding and can be enforced by the court.
Often, the goal of the third-party mediator is to help the parties come to an understanding – that is, to seek a nonmonetary resolution of the conflict rather than a cash payment or other financial recompense. Litigation and arbitration, conversely, are strictly monetary in nature. Regardless of which solution is applied to a sublease dispute, though, you will want to contact an attorney. A skilled attorney from a firm like The plaintiff Law Offices of Peter N. Tragos can help you navigate New Jersey tenancy laws, local ordinances, regulations, and court proceedings.
Commonly Asked Questions about Subleasing in NJ
The following are common inquiries regarding subleasing in New Jersey:
1. Will a sublease terminate my original lease?
No. The terms of your lease will remain in effect unless there is conflicting language in the original lease that stipulates otherwise.
2. Can I end my original lease if I have a subtenant?
New Jersey landlords are typically required to honor terms in the original lease unless there’s reason to believe it is being violated. You may file a Civil Action against your landlord if they terminate your lease and not your sublease as a result of your original lease allegedly being in violation. The Courts will then make a decision to terminate both leases or not terminate either lease.
3. How long is a sublease in effect for?
The terms of the lease will dictate how long it is in force if not provided for specifically in the original lease or the sublease . If there is no specified term and none can be determined, the sublease will be in effect for a year from the date that the subtenant signed.
4. Can I refuse to renew my original lease if my subtenant elects to renew their sublease?
No. Both leases will have to be renewed for the original lease to terminate. However, if your subtenant elects not to renew their sublease, then you may terminate your original lease and evict the subtenant.
5. Can I be compensated for the additional expense of managing a sublease?
No. The rent that is received must go toward the payment of the original lease. Any residual funds are to be kept by the sublessor. Many original leases expressly stipulate that no monetary compensation must be paid to the sublessor by the subtenant.