The Concept of Property Subletting and its Scope in India

Property subletting is not a new concept. It has been here for long. But controversy has always walked hand in hand with this concept of subletting. Property subletting means the leasing of all or part of the property occupied by tenant during the period of his/her/ their unexpired duration of stay. Let’s make it simple.

The Concept

Everyone wants to earn some extra money; sometimes legally and sometimes illegally. Property subletting is somewhere in-between. It has often been seen that a tenant of any type of premises leases out the very same property to another person in return of a monthly rent. Thus the actual owner of the property does not get any share of that amount. Suppose A has taken a property on lease from B against a monthly payment of Rs. 1000; then A sublets the property to C against a monthly payment of Rs. 1200. Therefore, one is earning on someone else’s investment without actually creating a property.

These type of incidents can be seen in those cases where the actual owner does not live close to the property. The tenant may argue that s/he is already paying for the property and s/he has to right to use it for any purpose. But according to law, if a certain property is given on rent for residential purposes, it cannot be used as for commercial activities or benefits. The legal agreement for the same should be agreed between owner and the tenant. The tenant cannot involve or give away the property to rent to any third party. The purpose has to be definite. Subletting is a risky business regardless of whether it is a private or government property.

The Way-Out

There are instances where tenant has to sublet the property. But the legal consent of the actual owner is a must. Without the consent, the tenant cannot lease the property to anyone and for any purpose.

There are many co-operative societies where subletting can be found. But if you delve deeper, you will find that these are special cases. Suppose a person has to travel a lot due to his/her job but s/he does want to let go of the rented property or a person is ill and cannot stay in that rented property. Such cases get special consideration. The society or the owner can decide upon that. But even for that, the consent of the real owner must be acquired.

The Indian Scenario

Till date, many cases have been filed on this particular issue. And the judiciary system of India has debated hugely to decide whether property subletting is legal or not. In 2009, a bench of Justices R.M. Lodha and Tarun Chaterjee gave the order that partnership business can be carried out by the tenant but it cannot be a veil to conceal an illegal subletting. In the same year the Supreme Court of India passed the judgement that a tenant can be evicted from the property if s/he sublets the same property that s/he has taken on rent without the consent of the landlord. For commercial purposes the tenant can bring in new partners to his/her business but cannot sublet the property without the permission of the owner.

Subletting can become a source of money laundering and illegal transactions if the dealing is not done through proper financial institutions. The taxation, electricity bills and other related issues can become really complicated if the renting process is not done properly. For a tenant, it is important that s/he understands the legal implications of subletting and tread that line cautiously.

About the author: Vijay Kumar Gupta

Vijay Kumar Gupta, has more than 20 years of industry experience into various industry domains. He is an MBA in Real Estate & Urban Infrastructure from RICS School of Built Environment, accredited by Royal Institute of Chartered Surveyors.