Commercial Subletting UK: Rules, Consent & Risks

Overview

A commercial sublet, sometimes called an underlet, is where a tenant who already holds a lease grants a separate tenancy over all or part of those premises to a third party. The original tenant keeps the head lease and remains directly responsible to the landlord, while the new occupier (the subtenant) becomes responsible to the original tenant under the terms of the sublease.

It is a three-party arrangement in effect, even though the landlord is not usually a party to the sublease itself. Whether a tenant can sublet at all depends on what the head lease says. Most modern commercial leases either prohibit subletting outright, permit it only with the landlord's written consent, or allow it subject to specific conditions such as a minimum rent, restrictions on who the subtenant can be, or a ban on subletting part rather than the whole.

Getting this wrong can amount to a breach of the lease and, in serious cases, give the landlord grounds to forfeit the lease.

Key steps

1. Read the alienation clause in your head lease. The alienation clause is the section that tells you whether you can assign, sublet, share occupation, or part with possession. Check whether subletting the whole is treated differently from subletting part, and note any absolute bans. If the wording is unclear, that is a strong signal to pause before marketing the space.
2. Apply for landlord consent in writing. Where the lease requires consent, make a formal written request setting out who the proposed subtenant is, the rent, the term, and the intended use. Under section 1 of the Landlord and Tenant Act 1988, a landlord generally must not unreasonably withhold consent where the lease requires consent not to be unreasonably withheld, and must respond within a reasonable time.
3. Agree the commercial terms of the sublease. The sublease term must end before the head lease ends, because a tenant cannot grant a longer interest than they hold. Agree the rent, any deposit, repair obligations, insurance contributions, service charges, and permitted use. These terms should be consistent with the head lease so the original tenant is not left exposed to obligations the subtenant has not accepted.
4. Document the sublease and any licence to sublet. The sublease itself is a separate legal document between tenant and subtenant, and the landlord's consent is usually given in a licence to sublet, which is often a three-party deed. Stamp Duty Land Tax may apply to a new sublease depending on the rent and term. Check gov.uk for current thresholds.
5. Register or protect the sublease where needed. Subleases granted for more than seven years generally require registration at HM Land Registry. Shorter subleases may still need to be noted against the head lease title in some cases. Keep copies of the executed sublease, the licence to sublet, and any correspondence with the landlord in case of later disputes.

Common questions