Before any part of a commercial property is sub-let the tenant must get the permission of the landlord, this is called a licence to sub-let. Usually, the landlord must be satisfied that the new sub-tenant will uphold the terms of the lease and that their references are suitable. Most commercial leases will include provisions regarding sub-letting, however, the decision is up to the landlord. Many larger commercial properties, such as office blocks or large warehouses are more suitable for sub-lets than smaller properties.
What is a licence to sub-let?
Where a lease allows sub-letting, there will usually be strict provisions and written consent from the landlord is almost always needed before any action is taken by the tenant to sub-let. If the landlord consents to the sub-let, a formal licence will be drawn up between the landlord, tenant and sub-tenant together with any guarantors required. It is vital that all parties involved in a sub-let seek the advice of a professional commercial property solicitor to assess the terms and conditions of the licence. JMR Solicitors can assist you in checking these terms as a landlord, tenant or sub-tenant and advise you in getting the best possible outcome.
Who decides if a sub-let licence is granted?
It is ultimately the landlord’s decision as to whether a sub-let licence is granted, and usually, this consent will come with conditions. The most common conditions include:
- The rent paid by the sub-tenant must not be less than the than the open market rent payable at the time of the licence
- The sub-lease must not contain rent review provisions at the same time and on the same basis as stated in the lease
- The sub-lease must not be given in return for a payment of a premium
- The sub-tenant must provide a rent deposit or a guarantee
- The sub-tenant must not be provided with a rent-free period either at all or not for longer than would be usual in the open market
- The sub-tenant must comply with the terms of the lease, so far as they apply to the sub-let premises
- The sub-tenant must not be included in any renewal provisions. This is particularly important to ensure that the sub-tenant does not acquire rights of secure tenancy
Landlords should consider being open to negotiations regarding the provisions and should consult professionals before drawing up and sub-lease to ensure that everything is above board and is everyone’s best interests.