On receiving an application from your tenant for your consent to underlet, firstly, check what the lease says:
1. If the lease is says nothing about it or expressly allows underletting without consent, your tenant is free to underlet the property as a whole, or in parts, and the tenant does not need your consent.
2. If your tenant is allowed to underlet with your consent, is your tenant requesting consent to underlet the whole or part of the property? If the latter, check if the lease permits underletting of part. Also check whether or not there are restrictions on what can be underlet: for example, is there a definition of the permitted part or a limit on the number of underleases?
3. Does the lease contain a covenant by the tenant to pay your legal costs for dealing with an application for licence to underlet? If so, ensure that the tenant is aware of this and obtain a fee estimate from your solicitor so that your estimated costs can be covered by an undertaking requested from the tenant’s solicitor at the outset. This should protect you against having to pay any costs yourself, whether or not consent is actually granted.
4. If your tenant is allowed to underlet with your consent, you will be under an implied duty not to unreasonably withhold consent (section 19(1), Landlord and Tenant Act 1927). However, you may be entitled to impose conditions about the terms of the underlease, including the amount of rent to be paid by the sub-tenant. This is important because circumstances could arise in the future resulting in your becoming the sub-tenant’s immediate landlord.
5. If the lease prohibits underletting on the terms sought by the tenant, but you are still willing to give consent, consider whether you want this consent to be a personal concession to the tenant or whether you want this to apply to future tenants and underleases.
If you would like to discuss this further, then please contact Lily Meyer of Morrisons Solicitors Commercial Property Team in Wimbledon on 020 8614 4590 or by e-mail on [email protected].