Until now, if you wanted out of your lease early you had two choices: Find a friend of a friend willing to sublet the remainder of your lease, or pay your landlord a big chunk of change to terminate the agreement. (You could also just be a jerk, skip out, and deal with the consequences.) Now, nice people like you have a third option: Sell your lease online.
Flip, a new service that’s available as a website and iPhone app, is looking to bring old-fashioned subletting into the digital age by creating a marketplace for renters. In theory, through the marketplace, renters who want out of their lease can post it for sale. Pre-qualified renters looking to buy a lease can browse and choose a desirable pad. If both parties agree, the lease is either reassigned or a new lease is created and the new renter takes over, liberating the original tenant.
Please, Mr. Postman
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Currently, flip is in beta testing and available only in New York. Downloading the app is free, but it costs $50 to get pre-qualified as a potential renter. If you complete a deal, flip charges 10% of any money exchanged between renters. The app also offers a premium service “for individuals who want to find a qualified replacement as soon as possible,” says flip founder Susannah Vila. “This costs 10% of one month’s rent, and is only charged if a qualified replacement is found.”
Using technology to match people who are giving up a lease with people searching for an apartment seems like a win-win situation, but is it really a good idea?
You could save money—by not losing it
Ending a lease early can cost you. Navigating early termination is tricky, because laws vary by state and penalties vary by lease. On the extreme end, your landlord may opt to wait out your lease and sue you for the remaining rent. On the other end, your landlord may let you out of your lease with a small early-termination penalty fee. Most landlords (and landlord and tenant laws) will fall somewhere in between, asking for an early termination fee in the lease, but rarely taking tenants who vacate early without paying to small-claims court.
Landlords have the right to sue, but even if your landlord doesn’t chase after you, breaking a lease will still cost you.
“If you decide you want to sublease a property and you walk away, typically you’ll be giving up your security deposit,” says Scott Wallace, founder of Wallace Property Management Group, a property management franchise in the Southeast.
If you’re able to reassign the lease, potentially by securing a new tenant for a full lease, you may be able to avoid the early termination fees and save your security deposit.
Potentially a better deal for renters…
Finding a person willing to sublet your apartment for the last few months of your lease isn’t an easy task, either.
“Most renters looking for a place want the comfort and security of finding a place they will be for at least 18 to 24 months,” says Jonathan Eppers, CEO of RadPad, a California-based startup that lets renters pay rent using their smartphones. That’s typically how long tenants stay in a rental.
By potentially giving renters the option to pick up your place and have a new full-length lease in their name, your number of interested applicants could greatly increase.
… but you could find a dud
While it isn’t easy to hound your acquaintances for a replacement tenant, there is comfort in subletting your pad to your co-worker’s brother-in-law—at least you know him, sort of.
Selling your lease in an open online marketplace may be somewhat less comforting. While flip promises to fully vet interested applicants before letting them into the listings, you might still want to meet them in person, the old-fashioned way.
“If I were a renter using this service, I would want to meet someone in person at a public place before moving forward with anything. Ideally, I would like to meet with the property owner or landlord, too,” says Wallace.
If you don’t get to check everything out in person, you could end up with a renter who passed the online qualifications but didn’t pan out in real life, leaving you and your landlord in a bad spot.
… and face safety issues
Even if you have the option for a meet and greet, you’ll have to take more steps to protect yourself. “When you’re on an open marketplace, there’s a lot more room for things like identity theft and other unwanted activities. A lot of fraudulent activity is done over the Internet in some form or fashion,” says Wallace.
While flip—and future copycat companies—is likely running background checks on any interested parties, you’ll still have to do your own due diligence, adding to your workload.
… and your landlord may hate it
And then there is the small issue of the legally binding agreement between you and your landlord. While landlords are going to differ in opinion, there is no guarantee yours will be on board.
“I personally wouldn’t. Having said that, in areas with high turnover and/or with a lot of subletting activity, this might make sense,” says Wallace.
If your landlord doesn’t agree to it, you may not be able to get around it—and if you do proceed anyway, you could run into legal trouble if your landlord finds out.
In the end, an online leasing marketplace has some potential, but Eppers says sites like flip face “big challenges” before the idea can succeed. So if you need to move before your lease is up, you might want to try the traditional approach in addition to the new. But we don’t advise being a jerk … because karma.