Subletting business premises

Subletting gives another occupier rights under a separate agreement while the headlease remains in place. The original tenant therefore needs to assess both the incoming rent and the obligations it continues to owe the superior landlord. ^[1]

Compare the proposed sublease with the headlease

Check whether subletting all or part is permitted, what consent is required and whether the proposed term, rent or use is restricted. Identify shared areas, services and access routes where only part of the premises will be occupied.

Explain any rent-free period, concession or side letter to the adviser. An informal promise to the subtenant can create a mismatch with the permitted underletting terms.

Plan for the headlease ending

Review how the sublease interacts with a break, expiry or termination of the superior lease. Ask how occupation, notices and any security-of-tenure exclusion must be managed. Do not promise the subtenant a term or right the head tenant cannot safely grant.

Break conditions may require clearing all occupation. Security of tenure needs separate assessment for the relevant tenancy. Keep a calendar covering both leases, including insurance, review, consent and exit obligations, so income from the subletting does not obscure continuing liabilities.

Define exactly what the subtenant will occupy Prepare a plan showing the area to be sublet and the spaces that remain shared. Identify entrances, toilets, storage, parking and routes for deliveries or emergency access. A proposal to let spare office space may depend on facilities outside the rooms shown in the sublease. Ask the solicitor to compare the rights you intend to grant with those available under the headlease. The head tenant should not promise a facility, access period or use that it lacks authority to provide to another occupier.

Consider the practical division of services. Establish how electricity, heating, cleaning and waste collection will be measured or allocated, and whether the existing systems can support the arrangement. If costs are shared, describe the calculation and evidence the parties expect to use. A vague promise to split bills fairly can become contentious when occupation levels or trading hours differ. Include arrangements for repairs and reporting problems so the subtenant knows whom to contact and the head tenant can still meet obligations owed to the superior landlord. ## Check the proposed terms against headlease restrictions Give the adviser the draft sublease, intended rent, term, incentives and permitted activity. Disclose side letters or informal concessions as part of the same proposal. The headlease may regulate more than whether subletting is allowed in principle; conditions can concern the extent, rent, use and terms of the underletting. The RICS leasing code addresses the relationship between subletting and the tenant's own lease. ^[1] Ask which provisions must align and which may differ in the proposed arrangement, rather than assume a standard short sublease will be suitable.

Obtain advice on the consent application and any requirements involving a superior landlord or other party. Do not treat permission for one named occupier or particular arrangement as authority for a materially different one. If negotiations change the subtenant, area or use, update the advisers before occupation begins. Keep a clear record of the consent and its conditions. The head tenant needs to know not only that a document called a licence exists, but that the completed arrangement falls within the permission actually granted. ## Budget for the obligations that stay with the head tenant Compare expected subrent with the rent and other sums continuing under the headlease. Government guidance explains that subletting does not end the original lease or remove the tenant's responsibility for its rent if the subtenant fails to pay. ^[2] Consider a period of non-payment or vacancy and whether the business could still meet its own commitments. A subletting intended to reduce costs can create a funding gap if the budget assumes uninterrupted receipts while the headlease obligations remain fixed or increase through review.

Review deposit, guarantee and insurance arrangements for the subletting on their own terms. Ask how a subtenant's breach would be addressed and which evidence the head tenant should retain. If the headlease requires notification of occupation changes or compliance with insurer conditions, make those steps part of the plan. Keep the two rent accounts and correspondence organised separately. Clear records help distinguish a debt owed by the subtenant from a payment due to the superior landlord, which may need to be met regardless of the dispute below. ## Plan the relationship between both leases ending Compare the sublease term and any break rights with the headlease's expiry and termination provisions. Ask how statutory renewal rights are being addressed for the particular subtenancy and whether any exclusion process is appropriate. A short stated term does not by itself answer every question about continuing occupation. If the head tenant wants to use a break, identify how it can lawfully and practically deliver the occupation position required by that break while the subtenant has rights under a separate agreement.

Create a calendar covering important dates under both documents, including notices, reviews, consent conditions and planned departures. Assign responsibility for monitoring it even if the business changes personnel. Before agreeing an extension or informal continuation for the subtenant, obtain advice on the effect on the headlease and your own exit plans. At the end, retain handover evidence, final accounts and any release or settlement documents. The arrangement should close with both levels of obligation understood, rather than assuming that receiving the subtenant's keys settles the head tenant's position with the superior landlord.