The subleasing dilemma can be whittled down to one question - should you let your tenant sublease your rental? Of course, the answer to this question is more about protecting your property and business than it is about being flexible. For example, most homeowners insurance policies will not cover accidents for a sublet arrangement. If you are willing to consider a sublease make sure to consult with your insurance agent regarding coverage.
A proper lease will be written with a prohibition on any subleasing activity done without the landlord’s written permission. When considering a subleasing arrangement, make sure to remind the existing tenant (the one who wishes to vacate and sublease) that the new tenant they will sublease to is ultimately their risk regarding payment. If the sublessee fails to pay rent, for example, the existing tenant is liable for the unpaid rent. In addition, any property damage or negligence due to the actions or inactions of the sublessee are the existing tenant’s liability if that sublessee does not satisfy any obligations, financial or otherwise, concerning any damage or negligence. For those reasons, it’s up to the existing tenant to perform due diligence on the sublessee, which may include a credit report, a criminal background check, and an eviction check.
Landlord’s option to sublease in certain situations
Maryland law contains a provision for landlords to sublease a rental property if the tenant wrongly fails or refuses to take possession of the premises, or if the tenant vacates the premises before the end of the agreement term. In these cases, the landlord has the option to sublet the premises without prior notice to the tenant. The tenant then becomes secondarily liable for rent for the duration of the agreement term and for consequential damages resulting from their breach of the agreement, as long as the landlord gives tenant prompt notice of any default by the sublessee.
Short term rentals/Airbnb, et al
Leasing out your property on a short term basis has become very popular in some locations, especially if there are opportunities to take advantage of vacationers or a heavy influx of visitors for a big event. If you do offer your rental property as a short term rental make sure to do your homework before you list the property.
Know the rules
Take a look at the rules of your HOA or condo association. Do they allow for short term rentals? How about your city or county ordinances? Some cities are examining the use of properties for short term rentals and are trying to reduce the number of short term rentals through new ordinances that limit short term rentals to owners of their primary residence, or limiting short term rentals to a maximum number of nights per calendar year. In addition, short term rentals may require that a lodging tax be paid to the city or county, so make sure that you understand the obligations regarding collecting lodging taxes.