What is a Licence to Underlet?

In a commercial lease, there is usually a requirement that the landlord consent is required before the tenant can sublet their property. The Licence to Underlet is the landlord's formal written consent allowing the tenant to sublet their property to the third party.

Can consent be withheld? 

Where the lease requires consent and states that it is not to be unreasonably withheld, the Landlord and Tenant Act 1988  imposes duties on the landlord which include the following:

• giving consent except where it is reasonable to refuse;
• dealing with the application within a reasonable time; 
• giving written notice of the decision, and if consent is refused, explaining the reasons.

Conditions for consent

A landlord may require, where permitted by the lease, that the following is included :

• the underlease is on substantially the same terms as the head lease;
• the rent is no less than the market rent or the rent reserved by the head lease (depending on the lease wording);
• the underlease excludes security of tenure under Part II of the Landlord and Tenant Act 1954 where the head lease permits or requires this;
• the subtenant enters into a direct covenant with the landlord (if the lease allows);
• the tenant pays the landlord's reasonable legal and surveyor's costs of considering the application; and
• the underlease contains covenants mirroring those in the head lease.

What does the licence contain?

A licence to underlet usually includes:

• the landlord's consent to the proposed underlease;
• identification of the parties;
• details of the premises;
• approval of the form of underlease;
• conditions that must be satisfied before completion; and
• obligations to provide the landlord with a completed copy of the underlease after completion.

What if the tenant underlets without consent?

If the lease requires consent and the tenant underlets without obtaining it, the tenant is likely to be in breach of covenant. The consequences can include:

• damages for breach of lease;
• an injunction in appropriate cases; and
• in serious cases, forfeiture proceedings, subject to any statutory protections and the terms of the lease.

How Jordans can help? 

The process of obtaining a licence to underlet can be complex. Our Commercial Property Team will ensure that they understand your business needs whether you are the tenant or the Landlord. The team can then offer specific advice based on your circumstances. We understand the importance of ensuring the licence is drafted correctly and reflects the terms of the original lease to reduce any risk of disputes in the future. 

If you require any advice on licence to underlet, please contact the Commercial Property Team on 033 0300 1103.