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tenancy

Subletting vs. Assignment: What’s the legal difference?

Key Takeaway

Subletting means the original tenant rents out their property to a subtenant, remaining responsible to the landlord. Assignment means the original tenant transfers their entire tenancy agreement to a new tenant. Both generally require the landlord's consent, which cannot be unreasonably withheld, and the original tenant's liability often continues unless specifically released.

Subletting vs. Assignment: Understanding the Legal Differences in New Zealand Tenancy Law

When a tenant wishes for someone else to occupy their rented property, two common legal mechanisms in New Zealand residential tenancy law are subletting and assignment. While both involve allowing another person to reside in the premises, they have distinct legal implications for the original tenant, the new occupant, and the landlord under the Residential Tenancies Act 1986 (RTA).

What is Subletting?

Subletting occurs when a tenant (referred to as the mesne tenant in this context) rents out all or part of the premises to another person (the subtenant). In a subletting arrangement, the original tenancy agreement between the landlord and the original tenant remains fully in force. The subtenant pays rent to the original tenant, and the original tenant remains directly responsible to the landlord for all obligations under the original tenancy agreement, including rent payment and ensuring the subtenant complies with the tenancy terms [Source: Residential Tenancies Act 1986, s 43(1)(b)].

Key aspects of subletting:

  • Continuing Liability: The original tenant remains fully liable to the landlord for all breaches of the original tenancy agreement by the subtenant [Source: Residential Tenancies Act 1986, s 43(1)(b)].
  • Separate Agreement: There is a separate tenancy agreement between the original tenant and the subtenant.
  • Landlord's Consent: A tenant must not sublet the premises without the prior written consent of the landlord [Source: Residential Tenancies Act 1986, s 43(1)(a)].

What is Assignment?

Assignment occurs when the original tenant (the assignor) transfers their entire interest in the tenancy agreement to a new tenant (the assignee). Upon assignment, the assignee effectively steps into the shoes of the original tenant, taking over all the rights and responsibilities directly from the landlord. The assignee becomes the tenant under the original tenancy agreement [Source: Residential Tenancies Act 1986, s 45(1)].

Key aspects of assignment:

  • Transfer of Rights: The assignee gains all the rights and obligations of the original tenancy agreement.
  • Continuing Liability: Unless the landlord has expressly agreed to release the original tenant (assignor) from liability, the assignor remains liable to the landlord for any breach of the tenancy agreement by the assignee that occurs at any time during the period of the assignment [Source: Residential Tenancies Act 1986, s 45(2)].
  • Landlord's Consent: A tenant must not assign the premises without the prior written consent of the landlord [Source: Residential Tenancies Act 1986, s 43(1)(a)].

Landlord's Consent and Unreasonable Withholding

For both subletting and assignment, the tenant is required to obtain the landlord's prior written consent [Source: Residential Tenancies Act 1986, s 43(1)(a)]. A landlord must not unreasonably withhold consent to an assignment or subletting [Source: Residential Tenancies Act 1986, s 44(1)].

Reasons that may be considered reasonable for a landlord to withhold consent include [Source: Residential Tenancies Act 1986, s 44(2)]:

  • The proposed assignee or subtenant is not a suitable tenant (e.g., based on previous tenancy history or ability to pay rent).
  • The premises would become overcrowded.
  • The assignment or subletting would breach any head lease (an original lease agreement if the landlord is also a tenant).
  • The assignment or subletting would breach any encumbrance affecting the premises (e.g., mortgage conditions).

If a landlord unreasonably withholds consent, the tenant may apply to the Tenancy Tribunal for a remedy [Source: Residential Tenancies Act 1986, s 44(3)]. A landlord may also recover any reasonable expenses incurred in considering an application for consent to an assignment or subletting [Source: Residential Tenancies Act 1986, s 44(4)].

Key Differences Summarised

Feature Subletting Assignment
Relationship Original tenant remains landlord to subtenant; original tenant is liable to landlord. New tenant replaces original tenant as party to original tenancy agreement with landlord.
Liability Original tenant remains fully liable to landlord for subtenant's actions. Original tenant (assignor) remains liable for assignee's breaches unless expressly released by landlord.
Tenancy Agreement Original tenancy agreement remains in place; new separate agreement between original tenant and subtenant. Original tenancy agreement continues, with new tenant stepping in.
Consent Required? Yes, prior written consent from landlord. Yes, prior written consent from landlord.

Resolving Disputes

Any disputes arising from subletting or assignment, including questions of unreasonable withholding of consent or breaches of tenancy agreements, can be heard and resolved by the Tenancy Tribunal [Source: Residential Tenancies Act 1986, Part 4]. The Tenancy Tribunal is a judicial body that can make binding decisions and orders regarding tenancy matters.

When to Seek Independent Legal Advice

Navigating the complexities of tenancy law, especially regarding subletting or assignment, can be challenging. Individuals involved in these situations should consider seeking independent legal advice to understand their specific rights and obligations. Information can also be obtained from official government agencies like Tenancy Services or Community Law Centres. Community Law Centres offer free legal advice and assistance to those who qualify [https://communitylaw.org.nz/].

Key Resources