Sham sublease in an apartment building: when section 2(3) MRG opens main-tenant protection

A complete sublease is a warning sign in an apartment building, but it is not by itself proof of a sham sublease. Section 2(3) MRG gives the subtenant a specific route to seek recognition as the main tenant where the circumstances leave no reasonable doubt that the main lease was concluded only for subletting and for circumventing the statutory rights of a main tenant.

The decisive issue for owners, buyers and residents is documentation. The review covers the original main lease, actual use, the relationship between the contracting parties and the person who carries the economic risk of the tenancy. A later label saying “sublease” does not replace that review.

What section 2(3) MRG requires

Section 2(1) MRG distinguishes a main lease from a lease concluded with an owner, usufructuary or another person in one of the positions named there. Section 2(2) MRG treats a lease with another person as a sublease. The fact that an agreement is a sublease is therefore not enough for recognition under subsection 3.

The circumstances must be assessed as a whole. The main lease must have been concluded only for subletting by the main tenant and for circumventing the statutory tenancy rights attached to a main lease. The subtenant may then seek recognition as the main tenant with the rights and obligations provided by the MRG. This is a statutory claim for recognition, not an automatic conversion of every sublease.

The recognition question must be kept separate from the effect of ending the main lease. Under section 2(2) MRG, the sublessor must inform the subtenant without delay when the sublessor’s right to use the property is dissolved. RIS case law treats the main lease and sublease as separate obligations. Anyone relying on section 2(3) MRG therefore has to establish the circumvention issue separately.

Which indicators of circumvention matter

The statute names concrete indications of a circumvention arrangement. One example is that the main tenant sublets more than one apartment in the same building in full. Another expressly named example is a complete sublease where the main lease is for a fixed term.

These examples create a rebuttable burden-of-proof rule. Where such a concrete indicator exists, the respondent must prove that there was no intention to circumvent the law. This does not mean that every fixed-term lease or every additional apartment automatically leads to recognition. The overall circumstances still determine whether the statutory inference applies and whether it has been rebutted.

The contractual history also matters outside the named examples. Relevant questions include whether the main tenant had a credible need for the apartment, whether it was rented from the outset for a specific person, who paid the deposit, rent and operating costs, and whether the owner was told that the main tenant would actually use the premises. An isolated irregularity is not the whole assessment, but several facts can form a consistent pattern.

What evidence the review needs

The starting point is the complete main lease with all amendments. The file should also contain the sublease, handover records, information on actual use, correspondence about taking over the apartment, and the arrangements for the deposit, rent and operating costs. In a transaction, each record must be clearly assigned to the relevant unit.

Payment flows can confirm the contractual roles or raise questions. The review should identify who pays whom, whether the agreed amounts match the accounting, and who actually carries the economic risk of the tenancy. Bank records should be used only to the extent legally permissible and necessary for the specific issue.

The timeline is also evidence. Was the main lease signed shortly before the sublease? Was a complete sublease planned from the outset? Was the owner told about a different use? A chronological file containing contract versions, messages and handovers prevents later explanations from obscuring the original arrangement.

Consequences for residents, owners and buyers

Recognition under section 2(3) MRG can give the subtenant the basis for asserting the tenancy against the owner as a main lease. Whether the conditions are met depends on the facts and the available evidence. Long occupation or punctual payment of the subrent does not automatically satisfy the statutory test.

For owners and managers, the issue becomes urgent when a notice, eviction threat or sale is being considered. Treating the occupant as a freely replaceable subtenant without review can be as risky as assuming main-tenant protection without evidence. The contract chain, actual use and communications should be reconciled before a formal statement is sent.

Buyers should record the issue as part of tenancy due diligence. The rent roll should show the main tenant, subtenant, start date, fixed term, full or partial subletting and documented irregularities for each unit. Open recognition or eviction issues, including their evidence, procedural status and economic impact, belong in the data room and, where appropriate, the sale agreement.

A practical process when circumvention is suspected

First, place the main lease, sublease and actual use side by side in chronological order. Then record the statutory indicators in section 2(3) MRG and the other relevant circumstances. Each assumption should be traceable to a contract, payment, message, statement or clearly labelled inference.

The next step is to identify who needs to make a statement or bring a claim. Residents need their own contractual position assessed. Owners and buyers must also evaluate recognition risk, eviction risk and disclosure in the transaction. Legal assessment should come before settlement proposals, termination notices or binding assurances.

The topic page Rent rolls and lease agreements explains how tenancy data can be organised in an apartment building. If the main lease has already ended, see Main lease ends: notice and subtenant protection. For a purchase review, the topic page Due diligence and data room provides the broader framework.