Licence To Underlet Solicitors
If you want to sublet your premises as a tenant you will first usually need to get permission from your landlord. This allows the landlord to have a say in how the tenancy is run and who the subtenant is.
Underletting is a useful option for the owner of commercial property who wants to dispose of part or all of their premises. When you underlet your premises, you become a landlord to a subtenant or undertenant.
If you are planning to enter a sublet agreement or you are already engaged in one, it is important to seek legal support to make sure you fully understand the obligations placed on you by the agreement and your rights and responsibilities as a landlord or underletter.
Our network of commercial property solicitors is on hand to help you navigate the complex world of underletting.
A solicitor can draft and proofread a license to underlet to make sure that it is legally binding and protects the rights of landlords, tenants and subtenants alike.
Get in touch with our legal assessment team for a free case evaluation and quote today.
What is a licence to underlet?
A licence to underlet is permission given by a landlord to a tenant that allows a tenant to sublet the entirety or part of a property they’re renting.
The tenant is still responsible for the property and any damage caused by the subtenant. As the original tenant you remain a tenant to your landlord so you must be aware of your responsibilities to them and not ignore them.
The original tenant and the landlord will sign a legal document which allows the tenant to sublet the property unless the landlord has a good reason for refusing.
The landlord can use the licence to underlet to include tenant obligations relating to the proposed underlet. Landlords will typically grant permission to sublet through this formal notice.
Whole Underlet Licence
A whole underlet licence gives the tenant permission to sublet the entire property that they’re renting.
Part Underlet Licence
A part underlet licence gives the tenant permission to sublet part of the property that they are renting from their landlord.
Tenants with leases in smaller properties may only be permitted to underlet part of the building they occupy.
A larger building where a tenant leases several floors in an office building may allow the tenant to underlet part of their building by renting out a floor to a business that requires more space.
When might a commercial property owner grant a licence to underlet?
When a tenant requests to underlet the property they’re renting it is up to the landlord to decide whether they want to grant a licence to underlet or not.
Whether a landlord decides to grant the licence will depend on the type of property, their relationship with the tenant and the landlord’s circumstances.
A landlord should get legal advice before entering into a licence to underlet to ensure the terms and conditions are worded correctly and will be legally binding.
A landlord may choose to grant a licence in the following circumstances:
When the rent for the sublease is no less than what the current pays under their lease.
When the sublease includes rent review controls which reflect those of the main lease.
When the tenant does not benefit from a fee paid by the subtenant.
When the subtenant is not granted a rent-free period.
When the subtenant provides a deposit or guarantee.
When the subtenant must comply with the obligations in the lease.
When the sub-lease is excluded from the renewal provisions of the Landlord and Tenants Act 1954, otherwise a subtenant can benefit from the rights of security of tenure.
What is the difference between a licence to underlet and a sublease?
A sublease and underlet are essentially the same.
Both underleases, granted by a licence to underlet, and subleases create new leases from an existing lease.
The terms can be used interchangeably, one might be used in one location or region while the other could be used elsewhere.
Can a tenant underlet part of their commercial property to another party without a licence?
In some circumstances, this may be possible. However, in the majority of cases, a lease will say that a tenant must get permission from the landlord if they want to sublet a property in part or whole.
If you are unsure, your lease it should outline whether subleasing is possible and under what circumstances it is allowed.
What are the rights and responsibilities of tenants who are granted a licence to underlet?
When a tenant is granted a licence to underlet a new lease will be created between the tenant and the undertenant.
As the original tenant named on the lease, you will be responsible for observing the tenant covenants specified in the lease until it comes to an end. You can be held personally liable if the sublessor breaches the lease.
Can a licence to underlet be revoked?
A licence to underlet can be revoked:
When a tenant applied for the licence with fraudulent documents or a forged identity.
When someone other than the licensee is using the premises.
If the tenant is prosecuted or receives a disposal.
When the tenant does not have the right to work in the UK, this doesn’t apply to directors of UK-registered companies.
When there has been a breach of licence criteria or the landlord decides a tenant is unfit to hold a licence.
How do rent payments work for a subtenant under a licence to underlet?
When you apply for a licence to underlet, you’ll need to be comfortable that your subtenant will be able to afford the rent on the premises and trust that they’ll comply with the terms of the underlease.
Typically, the rent charged to a subtenant follows the rent paid in the original lease or is calculated against the market rent.
When a subtenant breaches the terms of the lease, by not maintaining the property for example, your lease will be breached and you’ll have to cover the costs of rectifying any issues.
Can a subtenant make alterations to the commercial space under a licence to underlet?
Most commercial leases don’t allow tenants to make alterations to a rented commercial space without the permission of the landlord.
If a landlord consents to any alterations planned by a tenant or subtenant, this will be recorded in either of the following legal documents:
Licence to alter – should establish what the proposed works are, how they comply with relevant legislation and require the tenant to remove works at the end of their tenancy
Licence to sublet – the works allowed will usually be specified in the document
A tenant who makes alterations to their property without consent may be in breach of their lease. A landlord can respond by evicting a tenant. Tenants may also be charged for the landlord’s costs when removing any alterations and or evicting a tenant.
Consent can be applied for after alterations have been made, as long as a landlord okays them.