This cheatsheet includes practical tips to understand key clauses and avoid disputes in leasing agreements.<\/p>\n <\/div>\n \n\nDownload Now<\/a> <\/section>\n <\/div>\n\n\n\n\n A commercial lease is an agreement between a freeholder or leaseholder of a property and a tenant for the tenant to exclusively occupy the property for a fixed term. The actual lease will set out all the terms of such obligations, particularly each party\u2019s rights and obligations. It will cover the majority of situations that can arise during a business\u2019 use of the property. The landlord will also want to safeguard their property from the usual risks that can arise from a tenant\u2019s occupation.<\/p>\n\n\n\n This can include third-party occupation of the property, including through a sublease. The landlord will be concerned with the subtenant’s financial standing and their ability to comply with all obligations under the original tenant\u2019s lease. They will want to ensure that any \u2018covenant\u2019 from the original tenant (a promise to comply with certain terms) is also observed by the subtenant. This is particularly relevant where the subtenant is responsible for the entire property.<\/p>\n\n\n\n On the other hand, a tenant may want to ensure that subletting is permitted and will need to be familiar with any conditions attached to it. If the tenant\u2019s business grows or they encounter financial difficulties, subletting can allow them to move to bigger\/smaller premises as needed. <\/p>\n\n\n\n Subletting is a form of alienation of the commercial lease, as is, for example, lease assignment<\/a>, and it is a lease that sits under another lease (the head lease). For example, subletting may occur when a commercial tenant has a lease covering five separate offices and they wish to sublease one. <\/p>\n\n\n\n Let us explore some key points to note about subletting in a commercial lease.<\/p>\n\n\n\n If a tenant sublets their business premises, they must create a sublease, also known as an underlease. The sublease is a new lease agreement for the commercial space. It will have a lease term that cannot exceed the existing lease term. Therefore, if the lease term end date<\/a> is 31 December 2025, the sub-lease end term date can be any time before this date, and the head lease may specify the exact number of days prior, which is normally 2-3 days before the expiry of the head lease term. <\/p>\n\n\n\n When a commercial tenant creates a sublease or underlease, they become the landlord of the subtenant, to whom they lease part or all of their commercial premises. However, the tenant remains the commercial tenant for the property, and the landlord remains their commercial landlord under the headlease.<\/p>\n\n\n\n There is no statutory law specifically restricting subletting. Instead, any restriction regarding whether a commercial tenant can sublet will be in the lease agreement. If there are none (which is unlikely), the sublet can occur, and the sub-tenant could also sublease. The sublease they create would be a sub-underlease. <\/p>\n\n\n\n Furthermore, if a commercial lease<\/a> is silent on subletting, the commercial tenant will not even need their landlord\u2019s consent.<\/p>\n\n\n\n In reality, a commercial lease will either entirely prohibit subletting or allow it with restrictions, as outlined in the lease agreement. A commercial tenant must comply with these. Therefore, they must either refrain from subletting or follow the rules when doing so. If a tenant fails to do this, any sublease they create may not be binding on the landlord, but it will be a breach of their lease, which can entitle the landlord to terminate the lease. <\/p>\n\n\n\n Equally, a landlord must comply with the lease agreement. For example, the lease may say that any consent \u2018may not be unreasonably withheld or delayed\u2019. In this case, the landlord cannot withhold consent without a reasonable reason, and such a refusal should take a reasonable amount of time. <\/p>\n\n\n\n You should note that several other concerns may be relevant to the landlord\u2019s consent. For example, it may need to be given by deed, and the lease may allow them to reclaim any professional costs associated with this from the tenant.<\/p>\n<\/div>\n\n\n\n If a commercial tenant sublets their business premises with their landlord\u2019s consent, the latter may request that the sublease have specific provisions. These may include obligations that the landlord themselves can enforce; however, this will not mean the tenant can avoid responsibility for their own subtenant. <\/p>\n\n\n\n There are other provisions the sub-lease may contain, such as:<\/p>\n\n\n\nWhat is a Commercial Lease?<\/h2>\n\n\n\n
What is Subletting?<\/h2>\n\n\n\n
1. Sub-lease<\/h3>\n\n\n\n
2. Restrictions <\/h3>\n\n\n\n
3. Covenants<\/h3>\n\n\n\n
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\n Cheatsheet for UK Leasing Terms<\/div>\n
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