Underletting Flashcards
What is underletting in the context of leasehold property?
A. A tenant granting a lease to a new occupier for a shorter term
B. A landlord granting a new lease after expiry
C. A transfer of the lease to another tenant
D. A merger of two leasehold interests
A. A tenant granting a lease to a new occupier for a shorter term
Explanation: Underletting (also called subletting) involves the tenant creating a new lease to an undertenant. The head lease continues, and the tenant stays liable to the landlord.
Which type of covenant absolutely prohibits a tenant from underletting?
A. Fully qualified covenant
B. Absolute covenant
C. Reasonable covenant
D. Statutory covenant
B. Absolute covenant
Explanation: An absolute covenant prohibits underletting altogether. These are commonly used to ban underletting of part in commercial leases.
What must be true of the term of an underlease?
A. It must match the headlease exactly
B. It must be less than six months
C. It must be shorter than the headlease
D. It must end before rent is next due
C. It must be shorter than the headlease
Explanation: An underlease must always be for a shorter term than the tenant’s own lease. Otherwise, it would constitute an assignment.
Which of the following terms may be used interchangeably with “underletting”?
A. Overletting
B. Undercontracting
C. Mesne letting
D. Subletting
D. Subletting
Explanation: Subletting and underletting mean the same thing. Sublease = underlease; subtenant = undertenant. The SQE may use either.
A tenant on a 10-year lease wishes to underlet a portion of the premises for 2 years. The lease contains an absolute covenant against underletting of part. What is the legal position?
A. The underletting is prohibited
B. The underletting is allowed with landlord’s consent
C. The underletting can proceed if the tenant deducts rent
D. The underletting is valid if the parties agree
A. The underletting is prohibited
Explanation: An absolute covenant against underletting of part means the tenant cannot underlet even with consent. The restriction is total.
Sarah, the tenant, underlets to Tom. Tom breaches a covenant. The landlord wants to enforce the lease directly against Tom. Which of the following would make that possible?
A. Privity of estate
B. Direct covenant with the landlord
C. Privity of contract between landlord and Tom
D. An AGA signed by Tom
B. Direct covenant with the landlord
Explanation: There is no automatic relationship between landlord and undertenant. A direct covenant in the licence to underlet allows enforcement.
A tenant is underletting during a market downturn. The lease requires that underleases be granted at a rent no lower than the tenant’s rent. What issue might arise?
A. The undertenant will breach rent covenants
B. The lease will become invalid
C. The tenant may struggle to find an undertenant
D. The landlord must vary the lease
C. The tenant may struggle to find an undertenant
Explanation: In a falling market, requiring the underlease rent to match the main lease rent can make it hard to underlet competitively.
A tenant’s lease contains a qualified covenant against underletting of whole. What legal effect does this have?
A. Underletting is entirely prohibited
B. The landlord must always consent
C. No consent is required
D. The landlord must act reasonably and promptly when asked
D. The landlord must act reasonably and promptly when asked
Explanation: A qualified covenant is upgraded to a fully qualified covenant by statute. The landlord must not unreasonably withhold or delay consent.
Which of the following pairs does not have either privity of contract or privity of estate in a standard underletting scenario?
A. Landlord and undertenant
B. Tenant and undertenant
C. Landlord and tenant
D. Tenant and landlord
A. Landlord and undertenant
Explanation: There is no privity of contract or estate between the landlord and undertenant unless a direct covenant is given.
Which of the following is not usually a restriction in a commercial lease’s underletting clause?
A. No rent-free period beyond the market standard
B. Rent must be higher than that under the headlease
C. Underletting with unrelated property is prohibited
D. Underlease must have no less onerous covenants
B. Rent must be higher than that under the headlease
Explanation: Leases may require equal or minimum rent levels, but not usually higher than the tenant’s rent, as this is unrealistic and hard to enforce.
Why might a landlord worry about an undertenant becoming their direct tenant?
A. The underlease might breach repair terms
B. Rent might be underpaid
C. It can happen if the tenant forfeits the lease
D. It prevents lease renewal
C. It can happen if the tenant forfeits the lease
Explanation: If the tenant’s lease is forfeited or surrendered, the undertenant might try to remain in occupation and claim a direct tenancy or relief.
Why is there no equivalent to an AGA (Authorised Guarantee Agreement) for underletting?
A. Because AGAs are unlawful in underleases
B. Because the undertenant always pays more rent
C. Because undertenants are not parties to the main lease
D. Because the tenant remains fully liable anyway
D. Because the tenant remains fully liable anyway
Explanation: AGAs protect the landlord when a lease is assigned. In underletting, the tenant still holds the main lease, so there’s no need for a guarantee.
