Congrats! You found a tenant through Leasebreak who wants to sublet your apartment. How can you make sure they are the right tenant to minimize problems down the road? What steps should you take and paperwork should you request to properly qualify the tenant?
First, who has to worry about this?
If you are the landlord (and not the tenant), you definitely have to worry about this.
If you are the current tenant (and not the landlord), then there are some situations where you don’t have to even worry about qualifying the tenant because the landlord will do this for you.
So, before we get into “how to qualify (see below), let’s discuss when a tenant needs to worry about this.
WHEN A TENANT NEEDS TO QUALIFY A TENANT
If you are the current tenant of the property, whether or not you will be responsible for qualifying the tenant depends on the situation and what type of lease the new landlord is requiring (“lease assignment”, “leasebreak”, or “sublet”). Some landlords allow for more than one type of lease.
Lease Assignment
If you are “assigning your lease” to someone else (a “lease assignment”), your main job is to attract tenants through Leasebreak and send the tenant to the landlord to be qualified. The landlord will be legally responsible for all rents going forward since the lease contract will be between the landlord and the new tenant.
In a “lease assignment”, it is still a good idea to ask the landlords what the qualifications are so that you can communicate these to the prospective tenant in advance. You want to waste as little time as possible on candidates the landlord won’t find acceptable. This saves everyone time.
A “leasebreak”
Some landlords will allow you to “break your lease” (i.e end the lease contract early), and try to find a new renter to sign a brand new 12 month lease. This is also known as a “leasebreak”. This is similar to a lease assignment in that the landlord is responsible for qualifying the tenant since you would be no longer on the lease contract.
Sublet or Sublease
In a “sublease” or “sublet”, the landlord is allowing you to enter into a lease contract with the incoming tenant. In this case you would still be responsible to pay the landlord the monthly rent and the incoming tenant would pay you the monthly rent in return.
Sometimes even in a “sublease” situation, the landlord may want to do their own diligence on the prospective tenant (in addition to you) because after all, this new tenant is still living in the landlord’s building and the landlord will likely still have some liability.
However, you should not assume that this means you do not have to qualify the tenant. In these situations where you are 100% responsible for the rent payments, you should make sure you are doing what you can do qualify the tenants and minimize your financial and legal risk.
So how do you do this?
HOW TO QUALIFY A TENANT
Unfortunately, there is no guarantee to minimize all potential issues, but there are things you can do to make any kind of issues very rare and unlikely events. Here are some suggestions:
Application:
Have prospective tenants fill out a simple application or send you an email with some basic introductory information. This would include very basic information like full name, who would be living there, their employment status, and any other relevant information.
Important: Just make sure you are not discriminating during this process. There are federal, state, and city “Fair Housing Laws”. For example, here are the list of the protected classes in NYC.
Run Credit:
Second make sure you run the applicant’s credit. DO NOT PASS THIS STEP. If there is one step that can save you from some of the worst tenants out there (i.e. like squatters) it is to make sure you run credit.
If a prospective tenant tells you that they do not have any credit, you still should run it. Little or no credit is better than bad credit. If you have no idea how to do this, or don’t feel comfortable asking for a candidate’s social security number (which is needed to run credit) there are many reputable websites where you can just send the tenant a link to get their credit report.
When they get the link, they will pay, enter the proper information, and you will receive the credit report. One such reputable service is TenantAlert. (FYI: Leasebreak has no financial arrangement with this company.)
Applicant’s Other “Paperwork”:
While you are collecting their credit report, you can ask for some paperwork from the tenant to verify ID, cash on hand, annual earnings, and current employment. While you do not have to ask for all 6 of the following documents, you can ask for a subset of them. Landlords in NYC usually ask for some subset from documents on this list. They are: photo ID, letter of employment, bank statement, tax returns, landlord reference letter, and pay stubs. Here is more information on our sister website about these documents and why you may want to review them.
Note that one handy formula landlords use to see if the prospective tenant’s salary can support the rent, is to take the monthly rent and multiply it by 40. Generally, many landlords feel that the prospective tenant should make a gross salary (before taxes are taken out) of at least 40X the monthly rent.
For example, if the monthly rent is $3000 per month, many landlords feel that a prospective tenant should make at least 40 X $3000 or an annual salary of $120,000 before taxes are taken out.
Check Social Media To Verify:
Don’t forget to use the internet and “social media” as your friend and see if you can find your prospective tenant on Facebook, Instagram, or LinkedIn. Also, “google” them. See if they come up in any articles. You never know what you can find as it could help you verify them or have a better understanding of the prospective tenant.
Sometimes you can even ask the prospective tenant for a link to their LinkedIn Account or other social media profile, but note that this can sometimes also come across as a little too personal. It is understandable that a tenant may want to keep most of that information “personal”.
Accept the Tenant:
Once you have successfully verified and qualified the tenant and agreed to move forward with them, you should let the tenant know the good news and make sure they are still interested.
Schedule Lease Signing. Certified Checks:
At that point you can schedule a “lease signing.” At the lease signing is where the prospective tenant can bring the checks for a one month rent and one month of security deposit.
We would suggest you ask the prospective tenant to make the checks “certified”. This way, as soon as the lease is signed, you can be assured you “have a deal” and don’t have to wait 3 days for the checks to clear.
WHAT LEASE SHOULD YOU USE
Landlords use different leases. And if you are a tenant subletting your place to another renter, then the language and terms of the lease should probably be different.
While we would definitely suggest you get an attorney to help out here, the truth of the matter is that this is seldom done. It is just not practical and lawyers generally charge too much to make this worth the effort.
With this in mind here are two suggestions in terms of how to find the proper leases:
For landlords you can use standard NYC leases like the Blumberg A55 lease. (You can just google this and you should be able to find it).
For tenants, one suggestion is to download a sublease agreement on LegalZoom. Just make sure the terms are what need to be there.
Qualifying a Tenant is not easy, but if you follow these steps you will hopefully minimize any issues you have.
If you have any questions, don’t hesitate to ask us at Leasebreak. You can use the purple feedback button on any page of our website to ask a question about this.
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