Subletting is a rental arrangement in which a tenant leases either the entire property or its part to another individual, referred to as the subtenant. The terms regarding subletting are typically covered in the tenancy agreement. The clause may either explicitly allow or prohibit subletting, or it might also require the tenant to obtain written permission from the landlord before subletting. When the contract says that the tenant needs the landlord’s consent, the landlord can’t unreasonably refuse the request to sublet.
Please note that some tenancy agreements have no clause on subletting. In this situation, the regulations are the next:
- Tenants with periodic tenancies must get the landlord’s written permission, and landlords can refuse for any reason whatsoever.
- Tenants with fixed-term tenancies can sublet without the landlord’s consent.
Subtenant Rights and Responsibilities
Under the subletting agreement, the subtenant has the same rights and obligations as the original tenant, being entitled to the same services and facilities, including access to common areas.
Therefore, the sublease agreement should include the same terms and conditions as those stipulated in the initial tenancy agreement. This covers details such as the rent amount, the duration of the sublease, and any other relevant requirements.
The subtenant is responsible for paying rent to the primary tenant as well as for adhering to the terms and conditions outlined in the sublease agreement. Sometimes, the subtenant may be required to pay a security deposit.
The landlord is typically not accountable to the subtenant since this person isn’t part of a lease agreement. Exceptions may arise if the landlord directly accepts payments from the subtenant.
Tenant Rights and Responsibilities
General rights that a primary tenant has in the situation of subletting include:
- Subleting all or part of the property.
- Collecting rent from the subtenant as agreed upon in the subletting agreement.
- Occupying the property according to the rules outlined in the tenancy agreement.
A primary tenant has a financial responsibility towards the landlord. Consequently, if the subtenant fails to fulfill their rent obligation or causes any damage, the liability will be on the primary tenant.
Landlord Rights and Responsibilities
The landlord obtains the same rights and responsibilities that are outlined in the tenancy agreement that has been established with the primary tenant.
Please note that the landlord may face penalties in case where the tenant sublets a property to too many people, resulting in a qualification of a House in Multiple Occupations (HMO), in which case the landlord must comply with the HOM regulations on licensing and minimum room sizes.
AdminTech Recommends
To avoid rent collection issues, as well as disputes over who is responsible for damages, we recommend that landlords:
- Receive payments and deposits from the primary tenant to avoid any direct liability towards the subtenant.
- Regularly inspect the premises for any sign of illegal subletting:
- Multiple occupants
- Extra belongings
- Tenants receiving mail for people who don’t live at the property
- Unfamiliar people entering and leaving the property
- Tenants frequently absent or avoid letting you in the property for inspection
- Public registration of business at the address of the leased premises
- Complaints from neighbours or authorities.
- Carefully examine the terms and conditions of the proposed subletting agreement and the file of the proposed subtenants.
If you are a private or commercial tenant, we encourage you to:
- Request a guarantee and liability insurance from the subtenant, ensuring that the provided assurances are equivalent to those granted to the primary landlord.
- Examine the subtenant’s file, particularly their financial situation.
- Consider the subtenant’s family situation to avoid their right to request an extension of the subletting.
- Notify your landlord and ask him or her to send you the sublease agreement and all the information you need to obtain this agreement.
- Ensure that the sublease notice period aligns with the notice period specified in the main lease.
If you don’t anticipate returning to the same premises, consider opting for a lease assignment.
A lease assignment is a situation when an original tenant (assignor) transfers his or her lease to a new tenant (assignee). The landlord expects the new tenant to meet the same expectations as previously set for the assignor.
Consent of Landlord
Most leases require the landlord’s written consent before a tenant can assign their lease to another party. The landlord may have the right to approve or reject the proposed assignee if the new tenant does not meet the terms set out in the initial lease agreement, in particular:
- Financial status and proof of solvency.
- References, such as statements from previous landlords.
- Proposed use of the premises.
- Likelihood of requesting alterations to the building or works.
If the contract allows lease assignment but the landlord refuses without reasonable grounds, he or she may be liable to pay compensation to the existing tenant. Refusal based on matters outside the lease is generally unjustified, for example:
- The landlord argues that the tenant will affect the letting of other properties in the vicinity.
- The landlord argues that the tenant will affect the letting of other parts of the building of which the said letting forms a part only
- The landlord wants repossession
- The landlord wishes to withhold consent on discriminatory grounds, such as race, sex, or disability.
The landlord may also request a new deposit from the assignee before consenting to the assignment of the lease.
Lease Assignment Liabilities
Please note that the assignment of a lease to a new tenant does not automatically exempt the previous tenant from all his or her obligations. The assignor is usually required to sign an Authorised Guarantee Agreement which requires him or her to cover any rent and damages of the new tenant, but not any future tenant after him.
Landlords, in their turn, can only claim payments of rent within six months of the money being due provided that a complete notice has been served to the previous tenant.
Lease Assignment Cost
The lease assignment may be gratuitous or for a certain price that is applied to offset any cost difference:
- The assignee usually pays a price to the assignor if the rent is below market rate.
- The assignor should pay the assignee if the rent is above market rate.
Neglecting the rules according to lease assignment may result in legal consequences. The original tenant or the new one may have legal grounds to take action against the landlord. We want to share with you some legal tips that will help to avoid such an unfortunate situation:
- If the tenant presents you with an assignee, examine their financial and personal situation carefully to make sure that you have reasonable grounds to refuse, if you wish. Request necessary proof from the existing tenant.
- Make sure not to base your refusal on grounds outside the actual property leased, or on discriminatory grounds against the new tenant.
- Request a new deposit from the assignee or make sure that the assignor concludes with a transfer of deposit to the assignee.
If you are a private or commercial tenant, we encourage you to:
- Check to whom the security deposit will be returned and remember to ask the new tenant for the corresponding payment when transferring the deposit to him or her.
- Make a thorough assessment of the new tenant’s file and creditworthiness, because promises made by the new tenant are not binding on the landlord. Everything must be proven by objective documents and facts.
- Remember to draw up an inventory of fixtures and fittings when you leave so that you can clearly define which damages and repairs are your responsibility and which are the responsibility of the new tenant.
- Don’t confuse the lease assignment with subletting.
A lease termination is a situation when a landlord and a tenant have decided to end their rental agreement. It can occur for different reasons, however, has always to adhere to the legal requirements for lease termination that are outlined in the lease agreement.
While leases vary according to the duration, the rules of termination also slightly differ. Still, some of them apply to all types:
- The rental of parking spaces or garages, including other outbuildings, rented with the building, follows the same rules as the termination of the building itself, unless the rental is made separately.
- The lease may be terminated by transferring it to a third party (assignment of the lease), with the prior agreement of the landlord.
- The landlord has the authority to terminate the lease in advance for valid reasons, as specified in a resolutory clause in the contract that allows immediate termination in the event of significant breaches.
- In a commercial lease, the tenant generally has a right to security of tenure, that is a right to remain in property after the lease has ended. But the lease may be “contracted out” of security of tenure provisions by a simple or statutory declaration.
Fixed-Term Lease Termination
A fixed-term lease lasts for a specified period. The contract automatically ends after the last day of the set term.
When the fixed-term lease comes to an end, 3 options can be used:
- Sign a renewal agreement for a new fixed term.
- Let it become a rolling or a periodic tenancy.
Open-Ended Lease Termination
An open-ended lease is concluded without a time limit. Its termination depends on the document type.
- A commercial lease is concluded from 1 to 3 years. The notice period is commonly tied to the lease length, such as 1-3 months for a 12-month lease or 3-6 months for a 3-year lease. Additionally, it is possible to stipulate a minimum duration, with any notices becoming applicable only after that specified period.
- A residential tenancy agreement typically ranges from 1 to 3 years. Termination notice periods vary from 2 to 12 months, with the provision of a minimum duration (not less than 6 months) during which the termination notice can’t be issued.
- A parking licence agreement can be terminated at any time with a one month’s notice if the rent payment period is monthly, respectively one week’s notice if the rent is weekly.
Sale of Leased Property
If the landlord sells the leased property, the tenant’s interest in the property does not automatically become null. The lease is continued with the new owner, under the same terms. The buyer has to adhere to landlord responsibilities and may evict the tenant by respecting the law as well as the signed lease agreement.
Landlords or owners letting a property that want to avoid legal consequences and maintain a positive landlord-tenant relationship should stick to the following recommendations:
- Decide whether you would like to rent out the property for a fixed term or on a renewable basis and attach termination rules according to the document type.
- Include a break clause for early termination.
- If you don’t want the tenant to continue occupying the commercial premises after the set end date of the lease, make sure the tenant declines the security of tenure and waives the right to lease extension. This can be done using the Notice to Waive Security of Tenure. Please ensure that this document is signed at least 14 days prior to the lease signing.
- Consider whether to include the lease of the car park, furniture, or other outbuildings in the same contract to enforce the same cancellation rules, or in a separate contract.
- Promptly respond to any tenant complaints and assess their nature carefully so that an amicable solution can be found, that is much better than being notified of immediate termination, often accompanied by a claim for damages.
When it comes to a private or commercial tenant, this person should:
- Check the lease renewal clauses, as they may specify a longer notice period for termination than required by law.
- Examine whether the lease of the car park or other outbuildings is made in conjunction with the main lease, or whether it can be terminated separately, with a shorter notice period.
- Consider carefully whether you wish to terminate the lease due to defects and assess whether the defect is of sufficient severity. Other remedies may be available, such as rent reduction, and intervention for repairs or damages.
Please note, as information about lease termination is typically covered in a lease agreement, this document should be established in the right way. For this, you can take advantage of our legal lease agreement templates and adapt them to your needs.
