What is a sublease agreement?
A sublease agreement is a legally binding contract between an existing tenant (the "over-tenant or sublessor") of an apartment and a new tenant (the "under-tenant" or "sublessee"), who wishes to rent out the apartment prior to the expiration of the existing lease agreement. The sublease agreement will typically reference the lease agreement between the existing tenant and the landlord (the "master lease").
How to legally Sublease your New York City Apartment
While most lease agreements require that the tenant of record obtain the landlord’s approval before subleasing their apartment, some lease agreement explicitly say that the tenant is not allowed to sublet.
However, pursuant to New York State law, regardless of what your lease may say, most tenants have the legal right to sublet their apartment. Nevertheless, you still have to ask your landlord for permission to sublet your apartment. The formal procedure requires that you send a written request via certified mail, with return receipt requested. Included in your written request should be all the information about your proposed subtenant, and any other details of the arrangement such as the length of the sublease, and the amount of rent your subtenant will pay.
Pursuant to New York Law, your landlord is required to provide you with a reasonable explanation for denying your request (e.g., your proposed sublet has poor credit or not enough income). Your landlord has 30 days to approve or reject your proposed sublet. If the landlord does not respond, that is legally viewed as an approval.
If you are renting out a condo, a single-family home, or part of a multi-family property, then you do not need board approval to sublease an apartment.
Subletting a Sponsor Unit in a Co-op
Subletting a sponsor-owned apartment is much easier. Typically, the sponsor, (or developer), of a co-op building, will have many exclusive rights when it comes to an apartment that it still owns, including but not limited to not requiring board approval to rent the apartment. While a rental application is still required, you will still find the process to be much easier than if you were renting a standard co-op apartment. As always, sponsor-owned apartments are still bound to all New York City Rental laws, including the Airbnb laws which prohibit renting out apartments for less than 30 days.
Subletting a rent-regulated apartment in New York City
When renting out a rent-regulated apartment, you cannot charge your subtenant more than your current rent unless you are subletting a furnished apartment. In that event, you can charge a 10% surcharge. If you overcharge your subtenant, the subtenant can use the law protecting rent-stabilized tenants against overcharges. The subtenant might win damages of three times the overcharge, attorney's fees, and interest on the overcharge.
Moreover, if you are sublessee to a rent-regulated apartment, it's possible you can become a victim of what's called an "illusory tenancy" perpetrated by the landlord. An illusory tenancy is an illegal tactic used by some greedy landlords, and some tenant, whose primary goal is to receive additional profits on a rent-regulated apartment, by collecting higher than the legal regulated rent. For example, the legal regulated rent for an apartment is $1,000.00, but the landlord (or the tenant of record) sublets the apartment to you for $1,800.00. That means that the tenant of record and/or the landlord are receiving an $800 profit off you, illegally.
If you discover that you are a victim of an illusory tenancy scheme, you can sue the landlord and the tenant of record for the overcharge. If successful, you may receive the money back that you overpaid, as well as damages up to three times the overcharge amount, and possibly possession of the apartment with a rent-stabilized lease.
To ascertain whether you are a victim of an illusory tenancy scheme, your first step should be to obtain a certified rent history printout of the apartment in question, which you can get from the Division of Housing and Community Renewal.
What Happens if the subtenant doesn't pay rent/defaults?
If you choose to sublease your apartment, regardless of what is written in your sublease agreement, you are still liable to your landlord for all the terms and conditions under your master lease. That means, if your subtenant does not pay rent for six months, you remain liable to your landlord for all rental arrears, late fees, and legal fees pursuant to the master lease.
What happens when a subtenant continues to occupy the apartment after the sublease (and master lease) expire?
As always, the tenant of record is responsible and liable to the landlord for all the terms and conditions under the lease agreement even if they have a subtenant. As such, if you are unable to deliver clear and free possession of the apartment back to the landlord when the master lease expires, the landlord will more than likely commence a holdover proceeding against you as well as the subtenant for legal possession. The practical implications are that you will probably be responsible for unpaid rent and legal fees because you, not the subtenant have a lease with the landlord. However, assuming that you have a valid sublease, you would be entitled to sue your subtenant for reimbursement of those fees pursuant to your sublease agreement.