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A number of situations can arise which might lead a tenant to spend long periods of time away from their dwelling. Subletting often seems like a good option in those circumstances. But what are the insurance consequences in these situations? Let’s take a look at a few situations, and see what the impacts are on coverage.
Assigning a lease
According to Canadian law, when a tenant assigns a lease it means that they renounce their right to return to the rental unit. In that event, the tenant cedes all rights and responsibilities in connection with the apartment and must notify the landlord and find another tenant. It is up to the landlord to accept or reject the proposed new tenant, but he cannot “unreasonably refuse consent to an assignment”.
For example, if you decide to buy a condo or a house and you need to relinquish your apartment, it’s your best option. Properly executed, assigning a lease will free you of all responsibility for the apartment and you can make the move to your new home without unwanted baggage.
Long-term sublet
Again according to the law, when you sublet, you remain the tenant with all your rights and obligations intact. Unlike a lease assignment, in the case of a sublet, even on a long-term basis, the tenant remains completely responsible for the dwelling. The original tenant must act as the resource person for whoever is subletting the dwelling. The landlord must be advised and is bound to agree to the sublet unless he or she has compelling reasons to reject it.
When you rent out a condo or house that you own, you need to be just as careful. It’s advisable to draw up a clear rental agreement with the tenant.
A typical example of a long-term sublet is a student who has to leave town for three or four months for an internship abroad. By subletting, students in this situation can return to their apartment and avoid having to pay rent while they are away!
As for the insurance policy, although the lease is still in your name, if you no longer reside on the premises, your insurer sees the risk differently. Contact them about your particular situation as they will need to assess it.
And where does the subtenant fit in this picture?
As subtenants, it’s important to have a clear understanding of the conditions of the sublet. Whether you’re subletting an apartment long-term or renting a cottage for a weekend, insurance should be a primary consideration.
In the case of a sublet such as that described above, if you are living on the premises, you have to make sure that you’re covered. You need to find out if it’s possible to be covered by your own policy or be added to the tenant’s policy.
In the case of a temporary rental, such as a country cottage for a few weeks, your home insurance policy provides some protection. It contains a section titled tenant’s liability (or liability for premises you don’t own), that covers various kinds of perils such as fire. Call your broker to find out more!
The bottom line
There are a number of good reasons to consider subletting. But whether you plan to assign your lease, or sublet for the short or long term, you should contact your broker to make sure you have the right coverage for your specific situation.