Ready to Sublet? Here Is How To Quality A Tenant
Looking to break your lease because your wife is pregnant and you need more space? Perhaps you just got a new job, or sadly, lost your job. You’ve come to the right place! If you need to exit your lease early, most landlords will allow you to leave your lease agreement early as long as you find a qualified tenant to replace you. However, landlords can be very particular about how they do this, though you might be lucky enough to have one that is more flexible. In general, there are three different methods of exiting your lease early:
- Leasebreak: The landlord allows you to cancel the current lease and they will be looking for a new tenant to take over a new 12-month lease. In this case, the landlord will be qualify the tenant, so you don’t have to worry about it.
- Lease assignment: The landlord wants the new tenant to put their name on the lease, and the lease is “assigned” to the new tenant. So, if you have 7 months left on your lease, the new tenant will take over those 7 months and their name will go on the lease. Since they will now have a direct relationship with the landlord, the landlord will qualify these tenants as well so, once again, you are off the hook with respect to qualifying the new resident.
- Sublet: The landlord allows you to “sublet” the lease to a tenant. Essentially, in this situation, you are still the tenant, and your tenant would be the subtenant. The landlord will still be collecting rent from you and you will have to collect rent from the tenant. This means that ultimately you will continue to be responsible for the lease. In this case, it is crucial that you qualify the tenant. If you don’t qualify them correctly, there is a chance that the tenant can skip out on the rent, and you will be responsible. Since you are likely paying rent or a mortgage payment somewhere else, this could mean a huge financial burden for you.
So, how do you go about qualifying the tenant? If you have lived in many rental apartments, you know that the NYC landlords ask for a lot of information during the application process. This is because it is very difficult to evict a tenant in NYC and could take 4-6 months. (If you have any questions about the process of “eviction”, you should consult an attorney. We are not attorneys so please do not mistake anything in this article for legal advice).
When you are in the process of qualifying a prospective tenant, you need to think like a landlord and ask for the very same information that they require. Here are six key items to request:
- Employment. You want to know if they are currently working and how much money they make. Ask for a recent employment letter. This should show salary, position, when hired, and contact information of manager or human resource person you can contact for more info. As a general guideline, the tenant should earn at least 40 times the monthly rent (i.e. if your rent is $3000, they should be making around $120,000 annually).
- Recent paystubs. A paystub is the most recent proof of income and provides proof that they are still employed. It confirms what the letter of employment says.
- Tax returns. You’re looking for the first two pages of at least last year’s tax return, if not for the last two years. Given that, in many cases, people have more than one source of income, reviewing the tax return would capture that information. Tax returns can be yet another verification of the letter of employment, and will give you more history of their income.
- Bank Statements. Ask for a recent checking/savings account statement. It will be reassuring to see that the person has some liquid assets and is not running on empty.
- Driver’s license. This confirms that the person is who they say they are.
- CREDIT. Getting a credit score from your prospective tenant is the final way to check on their ability to pay rent on time every month. While you could simply ask them for a copy of their credit report - many banks, credit unions, and credit cards offer that information on a monthly basis, right on their statement - we would suggest that you have the information verified independently. There are a number of services out there (e.g. MySmartMove and Experian Connect) that offer credit and background checks; you can either pay for it yourself or ask the tenant to cover the cost as part of the “application fee”, and the report comes directly to you. The benefit of a full screening is that you often can see if the tenant has any evictions, bankruptcies, or foreclosures in their history. Since you will need someone’s social security number to run their credit, you have to make sure you are abiding by any privacy laws (Again, we are not attorneys so please do not mistake anything in this article for legal advice.). Some applicants appreciate being able to enter their SSNs directly into the online forms provided by those services, and you may prefer not to have that information in your hands as well.
Yes, it can be nerve-wracking sifting through the personal details of someone else’s life, trying to “read the signs” and determine if they will be a responsible tenant who pays on time and keeps the apartment in reasonable condition. Fortunately, if you make the effort to gather the six critical pieces of information we’ve described, you’ll have the best possible chance of finding a great match for your listing on Leasebreak.