Underletting

Question 1

Who does undertenant pay rent to?

Answer 1

The tenant - not direct to landlord

Question 2

Can T underlet part or whole of premises

Answer 2

Either depending on lease

Question 3

Consent required?

Answer 3

Absolute covenant - not allowed

Qualified covenant - only with LL consent

Fully qualified covenant - consent not to be unreasonably withheld and given in writing in reasonable time (28 days)

Question 4

Is qualified covenant upgraded to fully qualified

Answer 4

Yes

Question 5

Possible restrictions LL may impose on underletting

Answer 5

• prevent T from underletting premises together with property not belonging to LL
• on payment of a lump sum
• with rent free period beyond what is normal

LL may require that underlease is at a rent no lower than T is paying, and contains covenants no less onerous than in T’s lease

Question 6

Is undertenant liable to LL

Answer 6

No because no privity of contract or privity of estate

LL will need to covenant directly with UT - included in license to underlet

Question 7

Can tenant give AGA for undertenant ?

Answer 7

No - not equivalent of AGA in underletting

Question 8

Does tenant remain liable to Landlord after underletting

Answer 8

Yes

Question 9

Procedure to underlet

Answer 9

1. T apply to LL for consent
2. LL checks lender consent, request undertaking for costs, and draft license to underlet
3. T prepare draft underlease
4. T deduce title - produce copy of registered leasehold title or (if lease less than 7 years) LL’s freehold title, and a copy of T’s lease
5. UT raise pre-completion searches and enquiries - cpse1 and cpse3
6. T send completion statement to UT
7. UT raise pre completion searches
   - OS1 for underlease of whole of T’s interest
   - OS2 - for part of T’s interest
   - OS3 if lease not registrable
8. L, T and UT complete license to underlet
9. T and UT complete underlease
10. Post completion - UT pay sdlt and register underlease as appropriate
11. LL not party to underlease so T or UT will need to inform LL when underlease completes within 1 month

Question 10

Who drafts license to underlet

Answer 10

Landlord

Question 11

How does tenant deduce title

Answer 11

Always provide copy of lease, AND

Provide copy of registered leasehold interest, OR

If tenant does not have registered leasehold interest (eg less than 7 years) provide copy of LL’s registered freehold title

Question 12

Pre contract enquiries for UT to complete

Answer 12

CPSE1 and CPSE3

Question 13

Who drafts underlease

Answer 13

Tenant

Question 14

Pre completion searches required

Answer 14

OS1 - if underlease of all of T’s interest

OS2 - if underlease of part of T’s interest

OS3 - if lease is not registrable