How to sublet a property in Australia

Subletting a property in Australia feature

Subletting part of your residential or commercial rental property can provide some much-needed cash flow or rental assistance.

If you’re living in a rental property and there’s a spare room you don’t use, subletting it out to someone else can help you get some extra assistance with the rent. Subletting also offers a range of benefits for anyone wanting to sublet part of their business premises to a third party, providing extra cash flow and the potential to downsize your business.

However, there are some restrictions and drawbacks that apply to subletting arrangements so it’s important to know what they are before you start looking for a subtenant.

What is subletting?

Subletting is when a tenant leases out a room in a rental property to someone else who is not listed on the lease. Alternatively, as an existing tenant you also have the option to rent out the entire property to someone else for a set period of time within your fixed-term lease.

Under a subletting arrangement, that third party is known as a subtenant and has the same rights and responsibilities as other tenants. You would act as the subtenant’s landlord and be responsible for their behaviour and any loss or damage they cause.

Subletting is available for both residential and commercial properties so let’s look at the regulations and restrictions surrounding each type of property.

Getting your landlord’s consent

If you want to sublet all or part of your rental premises to another person, you’ll need to get the landlord’s written consent. The landlord cannot unreasonably withhold their consent when you propose to sublet to someone else and you will continue to live in the premises.

However, they do have the right to reasonably withhold consent in any of the following circumstances:

  • If the number of proposed occupants for the rental property will exceed the number allowed by the tenancy agreement or local planning laws
  • If the proposed subtenant is listed on a tenant database (these databases are run by private companies and contain the details of “bad tenants”)
  • If the landlord thinks the premises would become overcrowded as a result of the subletting arrangement

In addition, if the subletting arrangement you propose is for the whole tenancy or the whole premises, the landlord has the right to withhold consent regardless of whether or not it is reasonable.

The landlord is not allowed to:

  • Ask for money to give consent other than the reasonable cost of doing so (in some states, such as South Australia, your landlord cannot ask for any money to consider your request to sublet)
  • Increase your rent because you have sublet all or part of your rental property
  • Add any conditions to the lease agreement that restrict your right to sublet

How to ask for consent

You will need to write to your landlord to ask for their permission to sublet all or part of your rental premises. This can be done by drawing up a draft subletting document in which you name the proposed subtenant, the room they will be renting and the amount of bond and weekly rent they will pay. You can find a template for a draft subletting agreement below.

You should also attach evidence demonstrating that the proposed subtenant:

  • Has the financial capacity to pay the rent
  • Is of good character (for example, include a reference from a former landlord or a personal reference)

Your responsibilities

When you sublet part of your property to another person, you become known as the head tenant and have several important responsibilities. You have the obligations of a landlord in relation to the other person. You must:

  • Get your landlord’s consent. See the steps above on how to obtain your landlord’s written consent to sublet.
  • Find a subtenant. It’s your responsibility to find a suitable subtenant for your rental property.
  • Collect a bond. If it’s agreed that the subtenant must pay a bond, it’s your responsibility as the head tenant to collect bond payment from the subtenant and give them a receipt. You must lodge the bond with the relevant residential tenancy authority in your state or territory within 10 days.
  • Collect the rent. You will also need to establish a payment arrangement to allow you to collect rent from your subtenant.
  • Take responsibility. It’s up to you to ensure that the subtenant doesn’t cause any damage to the property or interfere with the privacy or peace of other residents and neighbours.

To prevent any problems, it’s recommended that you write up a tenancy agreement for your subtenant. This will outline the rights and responsibilities of all parties if any disputes arise.

Pros and cons of residential subletting

Pros

  • Help with the rent. Subletting part of your rental premises means you can access some extra financial assistance to help pay the rent.
  • Cover costs when you’re not there. If you live in a share house and you’re heading away on an overseas holiday for a few months, you could sublet your room to cover rental costs while you’re away.
  • Extra security. The physical presence of an additional person in a home can provide extra security or a deterrent to burglars, especially if it would otherwise be unoccupied for an extended period of time.

Cons

  • Extra responsibility. When you sublet, you must assume a range of extra obligations and become responsible for the actions of your subtenant.
  • Knowing your subtenant. If subletting to someone you don’t know all that well, asking for character references could be an essential step to help prevent problems down the line.

How is subletting different to assigning or transferring your lease?

Assigning or transferring is when you allow another person to take over your lease agreement. This option is suitable if you are on a fixed-term lease but you need to move out of the property before the lease ends.

You will need to get written permission from your landlord to assign or transfer your tenancy and they’ll also need to agree to accept the person you have proposed to take over your lease. If accepted by the landlord, the new person takes over your lease agreement and must abide by the conditions of the lease.

Commercial subletting

If you lease commercial premises from someone else, you may also have the option of renting all or part of those premises to another business owner. Similar to a residential subletting arrangement, you will first need to check that your own lease agreement allows it and that your landlord is willing to provide their written consent. Most lease agreements will stipulate that the landlord cannot unreasonably withhold consent but this is not always the case.

If the landlord does provide consent, you will then need to set up a separate sublease arrangement with the subtenant. You effectively act as a landlord in relation to the subtenant, collecting their rent and dealing with them directly, while at the same time maintaining all your responsibilities under the head lease agreement with your landlord. In some cases it’s possible to get your landlord’s consent to sublet the entire premises but assignment is usually the preferred option.

Commercial subletting most commonly occurs in large, multi-storey office buildings in large cities. These buildings are owned by strata companies or body corporates that lease them out to property management companies. Those property management companies then sublet suites or even whole floors to separate business owners.

Issues to consider when subletting

There are several factors you will need to consider when setting up and negotiating a sublease, including:

  • The term. The term of a sublease cannot be longer than the term of the head lease.
  • The use of facilities. You will need to specify which facilities the subtenant will and will not be able to access, such as bathrooms, kitchens and warehouse space.
  • Parking arrangements. Will the subtenant be allocated a certain number of spaces in the parking lot?
  • Exclusive possession. If you (as the head tenant) operate your business in the same premises, the subtenant has the right to exclusive possession of part of the premises.
  • Rent. You will also need to work out reasonable rent to charge the subtenant – a commercial buyer’s agent will be able to help you do this.

Sublease agreements can be complicated and confusing so it’s recommended you seek legal advice to help you draw up an agreement.

Pros and cons of commercial subletting

Pros

  • Extra cash flow. You can be provided with some extra income to pump into your own business.
  • Help with the rent. Subletting can give you the extra funds you need to cover the cost of renting your office premises.
  • Downsize. If you’re looking to downsize your business or make your operations more efficient, subletting could be the perfect solution.

Cons

  • Difficulty finding tenants. If your office is located on an area with an oversupply of commercial properties, you may have trouble finding a suitable tenant.
  • Responsibility. You must still meet the obligations of your original lease but with the added responsibility of managing a subtenant.

Make sure you consider all the benefits and drawbacks before deciding whether subletting is the right solution for you.

Copy the template for a draft residential subletting agreement below

Or view the template in Google sheets or download a Microsoft Word version.

Sub-letting agreement

I, [HEAD TENANT NAME] hereby agree to rent out [ROOM NAME E.G SECOND BEDROOM] at [ADDRESS] to sub-tenant [SUB TENANT NAME].

We will share common areas including [LIST ALL APPROPRIATE SHARED COMMON AREAS E.g Kitchen, Bathroom] and [SUB TENANT] will pay [$ RENT AMOUNT] per week. There will also be a bond amount of [$ BOND AMOUNT].

The agreement will last from [START DATE] to [END DATE].

Tenant signatures

Head-tenant:

Name: ____________________Signature: ____________________Date: ____________________

Sub-tenant:

Name: ____________________Signature: ____________________Date: ____________________

Landlord/Agent signature

I consent to the above sub-letting

Name: ____________________Signature: ____________________Date: ____________________

Standard residential tenancy terms in [APPLICABLE STATE] are implied by law.

You can view or download these from: [DELETE NON-RELEVANT STATES]:

NSWhttp://www.fairtrading.nsw.gov.au/pdfs/Tenants_and_home_owners/Residential_tenancy_agreement.pdf
VIChttps://www.consumer.vic.gov.au/library/forms/housing-and-accommodation/renting/residential-tenancy-agreement.doc
QLDhttps://www.support.transport.qld.gov.au/qt/formsdat.nsf/forms/QF4208/$file/F4208_CFD.pdf
NThttps://legislation.nt.gov.au/Legislation/RESIDENTIAL-TENANCIES-ACT
WAhttps://www.commerce.wa.gov.au/sites/default/files/atoms/files/rtaform1aa.pdf
ACThttp://www.tenantsact.org.au/wp-content/uploads/2016/02/Standard-Tenancy-Agreement-ACT-PDF.pdf
TAShttp://www.consumer.tas.gov.au/__data/assets/pdf_file/0007/123748/CBOS_Rental_Guide_V2_-_WEB.pdf
SAhttps://www.sa.gov.au/__data/assets/pdf_file/0005/17483/Fixed_term_lease_agreement.pdf
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