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Underlease of Whole Heads of Terms UK: Guide

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Part ofUK Property Law Guide

Written by Brad Askew Solicitor (non-practising)
Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice.
Updated June 2026 · England & Wales
When a commercial tenant decides to hand over the whole of their leased premises to someone else for a period, the arrangement is handled through an underlease. Before solicitors start drafting the formal document, it pays to sit down and agree the commercial shape of the deal first. That is where Heads of Terms come in. For an underlease of whole, this preliminary document records what the outgoing occupier (the sublessor) and the incoming occupier (the sublessee) have agreed in principle, from rent and term length to repair obligations and break rights. Getting these points down clearly, even in a non-binding form, tends to save weeks of back-and-forth later. This guide walks through what the document covers, when it is used, how it differs from an underlease of part, and the key sections you should expect to see.

What this document is

An underlease, sometimes called a sublease, is a lease granted by an existing tenant to a third party out of the tenant's own leasehold interest. The existing tenant remains bound to the superior landlord under the headlease, while taking on the role of landlord themselves under the new underlease.

When the whole of the premises is passed on, rather than a floor, a unit, or a defined part, the arrangement is an underlease of whole. Heads of Terms for this type of transaction are a short, pre-contractual document that captures the commercial deal between the parties.

They are typically marked 'subject to contract' and are not intended to create binding legal obligations, save for any specific clauses (such as confidentiality or exclusivity) the parties choose to make binding. The purpose is to give both sides, and their solicitors, a clear brief before formal drafting begins.

This reduces the risk of late-stage disagreements, helps with superior landlord consent applications, and keeps legal costs under control by narrowing the points that actually need negotiating in the underlease itself.

How to use this document

  1. Check the headlease first. Before agreeing anything, read your own lease. Most commercial leases restrict subletting, often requiring the superior landlord's consent, and may impose conditions on rent levels, term length, or the identity of the undertenant. Knowing what you can and cannot do shapes every other decision.
  2. Identify and vet the proposed undertenant. Agree who the undertenant will be, check their financial standing, and consider whether guarantors or a rent deposit will be needed. The superior landlord will usually want references and accounts as part of their consent process, so gathering this early avoids delays.
  3. Agree the commercial deal. Discuss and settle the headline terms: rent, term length, break options, rent review mechanism (if any), repair standard, permitted use, and who pays which costs. Record each point clearly in the Heads of Terms so there is no ambiguity when solicitors begin drafting.
  4. Apply for superior landlord consent. Submit a formal licence to underlet application to the head landlord, attaching the Heads of Terms, the proposed undertenant's details, and any supporting financial information. The head landlord cannot usually withhold consent unreasonably, but the process still takes time and legal fees.
  5. Instruct solicitors to draft the underlease. Once consent is on track and the commercial terms are settled, the sublessor's solicitor will prepare the underlease reflecting the Heads of Terms. Both parties' solicitors then negotiate the detail, the licence to underlet is completed, and the underlease is signed and dated.

Common questions

If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £149.

Common questions

Q Are Heads of Terms legally binding?
Generally no. Heads of Terms are usually drafted 'subject to contract', which signals that neither party is bound until the formal underlease is signed. That said, certain clauses, such as confidentiality, exclusivity, or who pays abortive legal fees, can be made expressly binding if the parties agree. It is sensible to mark clearly which parts, if any, are intended to have legal effect.
Q What is the difference between an underlease of whole and an underlease of part?
An underlease of whole passes the entire demised premises to the undertenant. An underlease of part carves out a specific area, such as a single floor or unit, while the tenant keeps the rest. Underleases of part tend to be more complex because they need to deal with shared services, common parts, access, and apportioned costs, which do not arise when the whole is sublet.
Q Do I need the superior landlord's consent to grant an underlease?
Almost certainly yes. The vast majority of commercial headleases contain a covenant against subletting without the landlord's prior written consent. Consent is usually given by way of a licence to underlet. Under section 19(1A) of the Landlord and Tenant Act 1927, consent generally cannot be withheld unreasonably, but the landlord can impose reasonable conditions.
Q Can the rent in the underlease be higher than the rent in the headlease?
In principle yes, though some headleases restrict the sublet rent to the open market rent or prohibit premiums. Always check the wording of your own lease. If there is a rent cap in the headlease and you exceed it, you risk being in breach, which could jeopardise consent and create enforcement issues with the superior landlord.
Q What happens to the underlease if the headlease ends?
As a general rule, when the headlease comes to an end, any underlease granted out of it also falls away. This is because an underlease cannot survive longer than the interest it was carved out of. There are limited exceptions, and tenants with business security of tenure under the Landlord and Tenant Act 1954 may have statutory rights, so the position can be nuanced.
Q Should the underlease be contracted out of the Landlord and Tenant Act 1954?
This is a commercial decision. If the underlease has security of tenure, the undertenant has a statutory right to renew at the end of the term. Many sublessors prefer to contract out so they can recover the premises when their own headlease ends. Contracting out requires a specific statutory procedure involving a warning notice and tenant declaration.
Q How long do Heads of Terms typically take to agree?
For a straightforward underlease of whole, Heads of Terms can often be settled within a week or two once the parties have the commercial points clear. More complex deals, or those involving guarantors, rent deposits, or unusual use restrictions, can take longer. Spending the time upfront usually shortens the drafting stage that follows.
If you're dealing with this kind of situation, speak to an experienced legal adviser who can walk you through it — from £149.

Sources

This guide is based on primary UK law and official guidance.

Brad Askew, Solicitor (non-practising)

Written & reviewed by

Brad Askew Solicitor (non-practising)

Brad is on the roll of solicitors of England & Wales but does not hold a practising certificate and does not provide legal advice. LegalDocuments.co.uk is not a law firm and does not provide regulated legal advice.

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Legal disclaimer
This article is for general information only. It is a tool to help you find your way — not legal advice, and not a substitute for speaking to a qualified adviser about your situation.