Consent of Lender and Superior Landlord for the Grant of a Lease
Obtaining the consent of the landlord’s mortgagee to the grant of a lease
If the landlord has a mortgage affecting the property, he should check the terms of the loan agreement to see whether the lender’s consent to the grant of the lease is required. It may be that the lender has given blanket consent to certain types of letting, e.g. a particular length of term or a certain level of rent. However, it is more likely that consent will be required to each letting.
Contact should be made with the lender at an early stage. The lender should be given a copy of the heads of terms and asked to confirm what other information they require. The lender will need to approve the final agreed draft of the lease and, assuming there are no concerns, will then issue a letter of consent which will often have the agreed form of lease annexed to it.
Is a superior landlord’s consent required?
If the landlord is itself a tenant of the property, there is likely to be a requirement to obtain the consent of the superior landlord.
The terms of the lease need to be checked carefully to establish first of all that underletting is permitted and secondly that any conditions relating to underletting are met. For example, the lease may specify whether the underlease must be of the whole premises or may be of part only; it may require the undertenant to be of a certain financial standing; it may require certain terms to be included in the underlease. The lease will almost certainly require the superior landlord to give consent to each underletting.
When making a request for consent to underlet, the landlord should provide the superior landlord with a copy of the heads of terms. The landlord should also include all relevant information about the proposed undertenant, to enable the superior landlord to make a decision. Relevant information is likely to include company details, audited accounts and references.
The superior landlord’s consent is usually given by way of a formal licence to underlet. This document will typically be prepared by the superior landlord’s solicitors whose fees will need to be paid by the landlord.
Usually, the superior landlord will be under a duty “not to unreasonably withhold or delay consent”. He must therefore deal promptly with the request for consent and must either agree that consent will be given or give reasonable grounds for refusing consent. This duty only arises once the superior landlord has received full information about the proposed underletting.