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Underleases and other Underletting Documents

Some business leases, particularly those with terms over 5 years, permit a tenant to underlet the premises subject to obtaining the landlord’s consent. The landlord’s consent is usually given in a formal licence to underlet.

Before a landlord will give consent he will usually want to be satisfied that the proposed undertenant will be able to pay the underlease rent and generally be a suitable occupier of the premises. However, it is harder for a landlord to object to an underletting than an assignment because the landlord will continue to receive rent from the tenant during the term of the underlease.

Once the landlord’s consent has been obtained, the tenant and undertenant can enter into an underlease. There are underlease templates in our Shops & Restaurants, Offices and Industrial folders. Depending on the term of the underlease, it may need to be registered at the Land Registry.

In this folder we have Letters for tenants seeking consent to underlet the whole or part of the premises, Heads of Terms for underleases and for licences to underlet, Land Registry Form AP1 and Notices of underletting. These documents will help tenants and undertenants to handle a proposed underletting effectively. 

Tenants should refer to the Protocol for Applications for Consent to Assign or Sublet when making an application for consent to underlet. The Protocol can be found at http://www.propertyprotocols.co.uk. Compliance with the Protocol is voluntary but the Protocol is widely supported in the commercial property sector. Our documents are designed to help the parties comply with the Protocol.

Underleases and other Underletting Documents is part of Property. Just £38.50 + VAT provides unlimited downloads from Property for 1 year.

Frequently Asked Questions

Can I sublet my commercial premises to another business? +
Often yes, with consent. Some business leases, particularly those with terms over five years, permit the tenant to underlet the whole or part of the premises provided the landlord consents, given in a licence to underlet. The landlord will usually want to be satisfied that the proposed undertenant can pay the underlease rent and is a suitable occupier. Check your lease first, as some leases prohibit underletting of part or bar it altogether. Simply-Docs provides the tenant letters, heads of terms and licence for underletting.
Is it easier to get consent to underlet than to assign? +
Often, yes. Because the tenant remains liable under the head lease and the landlord keeps receiving the rent from the tenant during the underlease, a landlord generally finds it harder to justify objecting to an underletting than to an assignment. The Landlord and Tenant Act 1988 duty to respond within a reasonable time and not unreasonably withhold consent still applies to a qualified covenant. The underlease terms should sit within the head lease, and the head lease may require the underlease to be at market rent and contracted out of the 1954 Act.
What is the difference between assigning and underletting? +
An assignment transfers your whole lease to a new tenant, who steps into your shoes and deals directly with the landlord, and after a lawful assignment of a modern lease you are usually released, subject to any authorised guarantee agreement. An underletting creates a new, shorter tenancy beneath your lease, so you become the undertenant's landlord while remaining the tenant of your own landlord and staying fully liable under the head lease. Choose assignment to exit, underletting to keep the lease but pass on space.
Does an underlease need to be registered and what documents do I need? +
An underlease granted for more than seven years must be registered at HM Land Registry in its own right, like any lease over that length; a shorter underlease is generally not registrable. To underlet you will typically need a tenant letter seeking consent to underlet the whole or part, heads of terms for the underlease and for the licence to underlet, the underlease itself, Land Registry form AP1 where registration applies and a notice of underletting where the head lease requires it. Simply-Docs supplies these tenant documents.
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