Subletting commercial property without proper landlord consent exposes UK businesses to forfeiture proceedings, with the average cost of headlease termination reaching £75,000–£150,000 when including relocation costs, lost fit-out investment, and business interruption. Yet research suggests around 40% of commercial sublets proceed with inadequate documentation, leaving both subtenants and undertenants legally exposed. Before you sublet even a single desk, download our free Commercial Subletting Agreement Compliance Checklist to verify your headlease permits subletting and identify the consent requirements you must satisfy.

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Essential Steps Before Subletting Your Business Premises

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Can You Sublet a Commercial Lease?

Quick Answer: Yes, you can sublet a commercial lease in the UK, but only if your headlease expressly permits subletting or you obtain the landlord’s prior written consent. Most commercial leases contain alienation clauses restricting subletting, and proceeding without proper authorisation constitutes a breach triggering forfeiture rights.

Whether you can sublet depends entirely on your headlease terms. Commercial leases typically include one of three alienation covenant types: absolute prohibition, qualified covenant, or fully qualified covenant. An absolute prohibition means subletting is completely barred under any circumstances. A qualified covenant requires landlord consent without stating the reasonableness standard. A fully qualified covenant requires consent but explicitly states consent cannot be unreasonably withheld, giving tenants stronger protection under the Landlord and Tenant Act 1927.

Alienation Clause Type Can You Sublet? Landlord Consent Required? Reasonableness Protection
Absolute Prohibition No N/A – subletting barred None
Qualified Covenant With consent Yes – must obtain written consent Implied by statute
Fully Qualified Covenant With consent Yes – must obtain written consent Express – cannot unreasonably withhold

Even where your lease contains a qualified or fully qualified covenant, never assume consent will be granted automatically. Landlords assess undertenant creditworthiness, proposed use compatibility, and whether the sublease terms adequately protect their interests. The consent application process typically takes 2–6 weeks and incurs landlord legal costs of £1,000–£3,000 that most headleases require the tenant to pay.

💡 Expert Insight: “The most expensive subletting mistake is proceeding without proper consent. Even where consent ‘cannot be unreasonably withheld,’ acting without actual written approval breaches the lease and triggers forfeiture rights – regardless of whether consent should have been granted.”

— Based on UK commercial property disputes, 2020–2025

If your headlease absolutely prohibits subletting, your options are limited: negotiate a lease variation (which landlords may reject or charge substantial fees for), assign the entire lease instead (if permitted), or grant a licence to occupy rather than a sublease (which creates different legal relationships). For guidance on lease variations and assignments, see our Commercial Office Lease Guide UK.

What Is the Sublet Clause in a Commercial Lease?

Quick Answer: A sublet clause (also called an alienation clause) is the provision in your commercial headlease that governs whether, how, and under what conditions you may grant a sublease to a third party. This clause determines your subletting rights, any restrictions on rent levels, and conditions the landlord may impose when consenting.

Commercial sublet clauses range from simple one-paragraph provisions to detailed multi-page sections covering every aspect of subletting. Well-drafted modern leases following the RICS Code for Leasing Business Premises typically include specific requirements around undertenant covenant strength, permitted sublease rent levels, sublease term requirements, and pre-agreed consent conditions.

Key elements found in comprehensive sublet clauses include: consent requirements specifying whether landlord approval is needed and on what terms; rent restrictions preventing subletting at below market rent or requiring profit sharing with the landlord; term restrictions ensuring the sublease terminates before the headlease expires; use restrictions limiting the undertenant to uses permitted under the headlease; and registration requirements for subleases exceeding 7 years which must be registered at the Land Registry.

Many sublet clauses also address specific consent conditions the landlord will impose when granting approval. Common conditions include: requiring an Authorised Guarantee Agreement from the subtenant guaranteeing the undertenant’s performance; prohibiting further subletting by the undertenant; requiring the undertenant to enter into a direct covenant with the landlord; and stipulating that the sublease must be excluded from the security of tenure provisions of the Landlord and Tenant Act 1954.

🧩 Key Takeaways So Far:

  • Always check your headlease alienation clause before considering subletting
  • Even “qualified” covenants require obtaining actual written consent
  • Landlord consent processes typically take 2–6 weeks and cost £1,000–£3,000 in legal fees
  • Sublet clauses may restrict rent levels, term length, and undertenant use

Are Sublet Agreements Legally Binding?

Quick Answer: Yes, properly executed commercial subletting agreements are legally binding contracts enforceable under English law. However, validity depends on several factors including landlord consent (where required), proper execution, compliance with headlease terms, and for subleases exceeding 7 years, registration at the Land Registry.

For a commercial sublease to be legally binding, it must satisfy the basic requirements of a valid contract: offer and acceptance, consideration (typically rent), intention to create legal relations, and certainty of terms. Unlike residential tenancies, commercial leases and subleases have no prescribed statutory form, though written agreements are essential for evidential purposes and most headleases require subleases to be in writing.

Critical validity factors include compliance with any consent requirements in the headlease. A sublease granted without required landlord consent remains binding between the subtenant and undertenant, but constitutes a breach of the headlease entitling the landlord to forfeit. This means the undertenant could find their occupation rights terminated through no fault of their own – a significant risk that makes undertenant due diligence on consent documentation essential.

Subleases for terms exceeding 7 years require registration at HM Land Registry within 2 months of completion. Failure to register makes the sublease legally ineffective against third parties, though it remains enforceable between the original parties. Registration costs range from £40–£910 depending on the rent level, plus professional fees typically of £500–£1,500.

The sublease must also satisfy any formality requirements in the headlease, which commonly include: execution as a deed (required for leases exceeding 3 years); specific covenants mirroring headlease obligations; and prescribed notice provisions. Our Commercial Subletting Agreement Template addresses these formality requirements with comprehensive provisions designed for UK commercial property transactions.

How to Sublet a Commercial Property?

Quick Answer: Subletting commercial property requires a systematic process: review your headlease to confirm subletting is permitted, apply for landlord consent, negotiate terms with your prospective undertenant, prepare the sublease documentation, obtain formal consent, complete the sublease, and where required, register with the Land Registry.

The subletting process begins with a thorough headlease review. Examine the alienation provisions to understand what consent requirements apply, whether any rent restrictions exist, and what conditions the landlord may impose. If your lease absolutely prohibits subletting, you must either negotiate a variation or consider alternative arrangements such as licence agreements or assignment.

Once you’ve confirmed subletting is possible, identify a suitable undertenant and agree commercial terms. Key negotiations include: the sublease rent and any rent review provisions; the sublease term (which must end before your headlease); repairing obligations; permitted use; and any rent-free periods or incentives. Document these agreed terms in heads of terms before proceeding with the formal consent application.

The consent application to your landlord should include: details of the proposed undertenant with evidence of their financial standing; the proposed sublease terms including rent, term, and use; confirmation the sublease will comply with headlease requirements; and any references or guarantor proposals. Landlords typically have 28 days to respond to reasonable consent applications under the Landlord and Tenant Act 1988, though complex applications may require longer.

With consent obtained, the sublease documentation can be finalised. Essential documents include the sublease agreement itself (using our Commercial Subletting Agreement Template), the landlord’s licence to sublet, and any direct covenants or guarantees required. For subleases exceeding 7 years, prepare Land Registry applications simultaneously to ensure registration within the 2-month deadline.

If you haven’t already, download the free Commercial Subletting Agreement Compliance Checklist to track each step and ensure nothing is missed.

Subletting Without a Written Agreement Puts Your Lease at Risk

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What Are the Rules on Subletting?

Quick Answer: Commercial subletting rules derive from three sources: your headlease terms (which may restrict or prohibit subletting), statutory requirements (including the Landlord and Tenant Acts and Land Registration requirements), and general property law principles governing the landlord-tenant relationship hierarchy.

The primary rule is that your sublease cannot grant more rights than you possess under the headlease. This “nemo dat” principle means the sublease term must be shorter than your remaining headlease term (typically ending 1–3 days earlier), the undertenant’s use must fall within your permitted use, and the undertenant’s obligations must be at least as onerous as yours under the headlease.

Headlease rules typically require: prior written landlord consent before subletting; the undertenant to covenant directly with the landlord to observe headlease terms; the sublease rent not to fall below market rent (to prevent “rack renting” or value destruction); the sublease to contain provisions mirroring headlease covenants; and payment of the landlord’s reasonable legal costs in reviewing and consenting to the sublease.

Statutory rules governing commercial subleases include: the requirement that leases exceeding 3 years must be made by deed; registration requirements at the Land Registry for subleases exceeding 7 years; the Landlord and Tenant Act 1988 provisions requiring landlords to respond to consent applications within a reasonable time; and the Landlord and Tenant Act 1954 security of tenure provisions (unless validly excluded).

Regarding 1954 Act exclusion, most headlandlords require subleases to be “contracted out” of security of tenure, preventing the undertenant from claiming renewal rights at sublease expiry. This involves serving a statutory warning notice at least 14 days before completion and obtaining the undertenant’s signed declaration. Our template includes proper 1954 Act exclusion provisions and guidance on the statutory procedure.

🧩 Key Takeaways So Far:

  • The sublease term must end before the headlease – typically 1–3 days earlier
  • Undertenant use must fall within your headlease permitted use
  • Most headlandlords require subleases to be excluded from 1954 Act protection
  • Subleases over 7 years must be registered at the Land Registry within 2 months
  • You remain fully liable under the headlease regardless of undertenant performance

How Does a Commercial Sublease Work?

Quick Answer: A commercial sublease creates a two-tier landlord-tenant structure where you (the subtenant) become the intermediate landlord to your undertenant, while remaining bound by all obligations to your headlandlord. The undertenant pays rent to you, you pay rent to the landlord, and you enforce sublease covenants against the undertenant while the headlandlord enforces headlease covenants against you.

The sublease relationship involves three distinct parties with separate legal relationships. The headlandlord and subtenant relationship continues under the headlease exactly as before – the sublease does not alter your obligations or the landlord’s rights. The subtenant and undertenant relationship is governed by the sublease, under which you become the undertenant’s landlord with all associated rights and obligations. The headlandlord and undertenant have no direct contractual relationship (unless a direct covenant is required), though the headlandlord’s actions regarding the headlease directly affect the undertenant.

Rent flows upward through the structure: the undertenant pays sublease rent to you, and you pay headlease rent to the landlord. These are separate obligations – if your undertenant defaults, you remain liable for the full headlease rent. Many subtenants build in protection by requiring sublease rent slightly higher than headlease rent (where permitted) to create a buffer, and by including direct payment provisions allowing them to pursue unpaid rent efficiently.

Covenant enforcement also flows through the structure. If your undertenant breaches sublease covenants (for example, by damaging the property or making unauthorised alterations), you enforce remedies against them under the sublease. However, because you remain liable under the headlease, any undertenant breach that constitutes a headlease breach exposes you to enforcement action from the headlandlord – including forfeiture. This is why sublease covenants must be at least as strict as headlease covenants, giving you appropriate remedies against defaulting undertenants.

Termination of the headlease automatically terminates the sublease. If your headlease ends through forfeiture, surrender, break clause exercise, or expiry without renewal, the sublease ends simultaneously. The undertenant has no automatic right to remain in occupation, though they may apply to the court for relief from forfeiture in appropriate circumstances. This subordinate nature of subleases is a critical risk factor for undertenants and should be clearly disclosed during negotiations.

For situations where you need flexibility for shorter-term arrangements or are offering space on a more informal basis, consider whether a Commercial Property Licence might be more appropriate than a sublease.

What Is a Commercial Sublease Agreement?

Quick Answer: A commercial sublease agreement is the legal document creating the tenancy between you (as subtenant/sublandlord) and your undertenant for commercial premises you hold under a headlease. It establishes the undertenant’s occupation rights, rent obligations, permitted use, term, and all covenants governing the sublease relationship.

The sublease agreement must achieve several objectives simultaneously: granting the undertenant sufficient rights to occupy and use the premises for their business; protecting your interests by ensuring undertenant compliance with terms mirroring your headlease obligations; satisfying any headlease requirements regarding sublease content; and complying with general legal requirements for commercial property transactions.

Essential provisions in any commercial sublease include: accurate identification of the parties (subtenant as “Landlord” under the sublease, undertenant as “Tenant”); precise definition of the demised premises, particularly for part-subletting; the sublease term with a termination date falling before headlease expiry; rent amount, payment dates, and any review provisions; service charge contributions if applicable; permitted use within headlease restrictions; repairing obligations appropriate to the property type; alienation restrictions (typically prohibiting further subletting); insurance requirements; and forfeiture provisions giving you appropriate remedies.

Beyond these core provisions, well-drafted subleases address headlease-specific matters including: acknowledgment that the sublease is subject and subordinate to the headlease; undertenant covenant to observe relevant headlease terms; provisions for headlease rent and insurance cost contributions; and clarification of what happens if the headlease is forfeited or surrendered.

💡 Expert Insight: “The single biggest error in commercial sublease drafting is inadequate ‘back-to-back’ provisions. If your headlease requires 14 days’ notice before forfeiture but your sublease allows 28 days, you cannot remove a defaulting undertenant quickly enough to cure your own headlease breach.”

— Based on UK commercial property drafting best practice, 2025

For properties held under Full Repairing and Insuring (FRI) leases, the sublease must carefully allocate these obligations. You may choose to pass FRI obligations to the undertenant (common for whole-property subleases) or retain responsibility for external and structural elements while making the undertenant responsible for internal matters (more common for part-subleases). Whatever approach is taken, the sublease must ensure you can meet your headlease repairing obligations.

Landlord Consent: The Critical First Step

Obtaining landlord consent is typically the most important and time-consuming aspect of commercial subletting. Even where your headlease states consent “shall not be unreasonably withheld,” you must still apply for and obtain actual written consent before proceeding. Acting without consent – even if you believe consent should be granted – breaches the lease and triggers forfeiture rights.

The consent application should be comprehensive, providing the landlord with all information needed to make a decision. Include: full details of the proposed undertenant including company registration, trading history, and management background; financial information demonstrating undertenant covenant strength (typically 3 years’ accounts plus references); the proposed sublease terms in heads of terms format; confirmation of compliance with any headlease subletting restrictions; and proposed arrangements for meeting landlord legal costs.

Landlords assess consent applications against several criteria: whether the undertenant has sufficient financial strength to meet sublease obligations (typically requiring net assets of 3–6 times annual rent); whether the proposed use is compatible with the building and other tenants; whether the sublease terms adequately protect the landlord’s interests; and whether any conditions are needed to address specific concerns.

Under the Landlord and Tenant Act 1988, landlords must respond to written consent applications within a “reasonable time” and must give reasons for any refusal or conditions. What constitutes reasonable time depends on application complexity, but 28 days is commonly expected for straightforward applications. Landlords who unreasonably delay or refuse consent may be liable for tenant losses, though pursuing such claims is expensive and time-consuming.

Common conditions landlords impose include: requiring an Authorised Guarantee Agreement from the subtenant; prohibiting further underletting by the undertenant; requiring 1954 Act exclusion; specifying minimum sublease rent; requiring rent deposit deeds from the undertenant; and requiring the undertenant to enter direct covenants with the headlandlord.

Rent and Financial Provisions in Commercial Subleases

Setting the sublease rent requires careful consideration of headlease restrictions, market conditions, and your commercial objectives. Many headleases contain provisions restricting sublease rent – either requiring rent at or above market value, or prohibiting the subtenant from profiting by charging more than headlease rent.

Where headleases permit profit subletting, subtenants may charge rent exceeding their headlease rent. This commonly occurs when headlease rent was fixed at historic levels below current market rates, or when the subtenant has added value through fit-out or improvements. Profit margins of 10–30% above headlease rent are achievable in strong markets, though excessive margins may deter quality undertenants.

Rent review provisions in subleases should typically mirror headlease arrangements. If your headlease provides for upward-only reviews every 5 years, the sublease should contain comparable provisions. Misaligned review dates create complexity in calculating contributions and may leave you exposed if sublease rent falls behind headlease rent after reviews.

Service charge arrangements require particular attention in part-subletting situations. You remain responsible for the full service charge under your headlease, so must ensure appropriate recovery from your undertenant. This typically involves passing through an appropriate proportion based on floor area, with provisions for adjusting contributions as actual charges are confirmed.

For situations involving delayed payment or non-payment, having robust invoice terms and debt recovery procedures is essential for protecting your position.

🧩 Key Takeaways So Far:

  • Landlord consent must be obtained in writing before subletting proceeds
  • Consent applications should include full undertenant financial information and proposed terms
  • Landlords must respond within a reasonable time under the 1988 Act
  • Check headlease for any rent restrictions before setting sublease rent
  • Service charge recovery provisions are critical in part-subletting arrangements

Liability and Risk Allocation in Commercial Subletting

Understanding liability allocation is essential for both subtenants and undertenants. The fundamental principle is that the sublease does not release or reduce the subtenant’s obligations under the headlease. You remain fully liable to your headlandlord for all headlease covenants, regardless of whether your undertenant performs their sublease obligations.

This continuing liability creates the core risk in subletting: undertenant defaults become your problem. If your undertenant fails to pay rent, you must still pay headlease rent. If they damage the property, you’re responsible for repairs under your headlease obligations. If they breach use restrictions, you’re in breach of your headlease. This is why sublease covenants must mirror headlease requirements – you need equivalent enforcement rights against your undertenant.

Forfeiture provisions illustrate this risk clearly. If your headlease can be forfeited for 14 days’ rent arrears, you need to know about undertenant defaults well before that deadline to take action. Sublease provisions should include: early payment dates (typically 3–7 days before headlease rent falls due); immediate notification of any breach; and swift forfeiture rights allowing you to re-enter before your own headlease is threatened.

From the undertenant’s perspective, the key risk is subordination. The sublease is carved out of the headlease and cannot exist independently. If the headlease terminates for any reason – forfeiture, surrender, break clause, or expiry without renewal – the sublease ends automatically. Undertenants should therefore conduct due diligence on headlease stability, including: remaining headlease term, subtenant financial strength, any break clauses or forfeiture risks, and headlandlord consent documentation.

Insurance obligations require careful coordination. Most headleases require the headlandlord to insure the building with costs recovered through rent or service charge. The sublease should clarify that the undertenant contributes appropriately to these costs and has no separate building insurance obligation. Contents and business interruption insurance remain the undertenant’s responsibility.

Break Clauses and Termination Provisions

Break clause provisions in subleases require careful coordination with headlease terms. If your headlease contains a break clause, you need sublease provisions allowing you to recover possession in time to exercise it. Conversely, if you’re granting the undertenant break rights, these cannot extend beyond your headlease security.

Sublease break clauses typically include: specific break dates aligned with business planning cycles; notice periods of 3–6 months; break conditions requiring compliance with sublease obligations and vacant possession; and rent payment requirements up to the break date. For detailed guidance on break clause procedures, see our Break Clause Notice Guide UK.

Termination through forfeiture is the ultimate remedy for sublease breach. Well-drafted forfeiture provisions allow re-entry for rent arrears (typically 14–21 days), material covenant breaches, and insolvency events. The section 146 notice procedure under the Law of Property Act 1925 applies to most breaches except rent arrears, requiring notice and opportunity to remedy before forfeiture proceedings.

End of term arrangements must ensure the subtenant can meet headlease reinstatement obligations. If your headlease requires removal of alterations and reinstatement to original condition, the sublease must impose equivalent obligations on the undertenant with sufficient time before headlease expiry to complete any works. Dilapidations claims are common at lease end and can involve substantial costs – early planning is essential.

Registration and Stamp Duty Land Tax

Subleases exceeding 7 years require registration at HM Land Registry to be legally effective against third parties. Registration must be completed within 2 months of completion. Failure to register means the sublease takes effect as a contract for a lease only, which has significant disadvantages including potential loss of priority against subsequent interests.

Registration fees are calculated based on rent levels: zero rent attracts fees of £40–£270 depending on any premium; rents up to £100,000 attract fees of £40–£455; rents above £100,000 attract fees of £95–£910. Professional costs for handling registration typically add £500–£1,500. These costs should be factored into transaction budgets and addressed in the sublease (typically paid by the undertenant).

Stamp Duty Land Tax applies to commercial subleases based on the Net Present Value of rent payable over the term plus any premium. For most subleases, SDLT on rent is nil where NPV is below £150,000, 1% on the portion between £150,000 and £5 million, and 2% above £5 million. Any premium is taxed at standard commercial rates: 0% up to £150,000, 2% on £150,001–£250,000, and 5% above £250,000.

SDLT returns must be filed with HMRC within 14 days of completion, even where no tax is payable. Late filing attracts automatic penalties starting at £100 and increasing for extended delays. The undertenant is responsible for filing and paying any SDLT due.

1954 Act Considerations: Security of Tenure

The Landlord and Tenant Act 1954 provides business tenants with security of tenure – the right to renew their tenancy at expiry on terms determined by the court if not agreed. This applies to subleases as well as headleases, meaning undertenants would ordinarily have renewal rights at sublease expiry.

Most headlandlords require subleases to be “contracted out” of the 1954 Act, preventing undertenants from claiming renewal rights. This protects the subtenant’s ability to recover possession at sublease expiry and ensures the headlandlord’s position is not complicated by undertenant security claims.

Valid contracting out requires a specific statutory procedure: the subtenant must serve a “health warning” notice on the undertenant at least 14 days before completion (or earlier if the undertenant provides a statutory declaration); the undertenant must acknowledge receipt and make either a simple declaration (if 14+ days before) or a statutory declaration before a solicitor (if less than 14 days); and references to the contracting out must appear in the sublease itself.

Failure to follow this procedure precisely means the exclusion is invalid and the undertenant retains full 1954 Act protection. Given the consequences – an undertenant with perpetual renewal rights would seriously compromise both sublease and headlease value – proper compliance is essential.

For properties already held on subleases, understanding your own 1954 Act position is important. If your headlease was validly contracted out, you have no renewal rights at expiry. If it retains 1954 Act protection, you may be able to renew, potentially on terms more favourable than current market rates.

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Frequently Asked Questions

Can I sublet part of my commercial premises while continuing to occupy the rest?

Yes, partial subletting is common and often the primary motivation for commercial subletting – recovering costs on surplus space while retaining premises for your own business. Your headlease must permit partial subletting (some only allow whole-property subletting), and the sublease must clearly define the demised premises, shared areas, and service charge apportionment. Consider practical issues including: separate access arrangements; partitioning and separation works; utility metering; security and key control; and parking allocation. Shared facilities like reception, kitchens, and meeting rooms need clear booking and usage rules documented in the sublease.

What happens to my sublease if I want to assign my headlease?

If you assign your headlease, the sublease continues with the assignee becoming the new intermediate landlord to your undertenant. The undertenant’s position is unaffected – their occupation rights and obligations continue under the sublease, simply with a different landlord. However, most headleases require existing subleases to be addressed in the assignment process, and the incoming tenant (assignee) will assess whether to maintain or terminate existing subletting arrangements. You should notify your undertenant of any pending assignment and consider their position in negotiations.

Can my landlord refuse consent to sublet if my prospective undertenant has poor credit?

Yes, undertenant financial weakness is a legitimate ground for refusing consent. Landlords reasonably want to ensure undertenants can meet their obligations, as undertenant defaults may ultimately affect the subtenant’s ability to perform headlease covenants. However, the landlord must act reasonably – refusing consent because an undertenant’s credit is merely adequate rather than excellent may be unreasonable. If refused, ask for specific reasons and consider whether additional security (rent deposits, guarantors, or parent company guarantees) might address concerns. Where consent cannot be unreasonably withheld, you may have a claim if refusal genuinely is unreasonable.

Is a licence to occupy different from a sublease?

Yes, licences and leases create fundamentally different legal relationships. A sublease grants exclusive possession – the undertenant has the right to exclude others, including the subtenant, from the demised premises. A licence merely grants permission to be on the premises without exclusive possession. Licences offer more flexibility (easier termination, no 1954 Act issues, no registration requirements) but less security for the occupier. Courts look at the substance of arrangements, not labels – if the occupier genuinely has exclusive possession, the arrangement may be a tenancy regardless of what it’s called. For genuine licence arrangements, see our Commercial Property Licence Guide.

What are the tax implications of subletting commercial property?

Sublease rent received is taxable income for the subtenant, though offsetting headlease rent and associated costs reduces the taxable amount. VAT treatment depends on whether you’ve opted to tax the property – if you have, sublease rent is VATable and you must charge VAT to your undertenant. If you haven’t opted to tax, sublease rent is exempt from VAT. Capital allowances on fit-out and improvements may be available and should be addressed in the sublease. Stamp Duty Land Tax applies to the undertenant as described above. Consider taking professional tax advice on your specific circumstances.

How do break clauses in subleases interact with headlease break clauses?

If your headlease contains a break clause you might exercise, the sublease must accommodate this. Options include: matching the sublease term to end before the headlease break date; including a conditional break in the sublease linked to your headlease break exercise; or granting a shorter sublease term that expires before any headlease break date. Never grant sublease rights that extend beyond a date when you might not have the headlease. If you exercise your headlease break, you’ll need vacant possession – you cannot deliver this if an undertenant has unexpired rights.

What if my undertenant wants to make alterations to the sublet premises?

Alterations rights under the sublease must align with headlease restrictions. If your headlease absolutely prohibits alterations, the sublease must too – you cannot grant permission you don’t have. If your headlease requires landlord consent for alterations, the sublease should require both your consent and confirmation that headlandlord consent has been obtained. Document any permitted alterations carefully, including reinstatement obligations at sublease end. For fit-out works, clarify ownership of tenant’s fixtures and who has the benefit of any warranties.

Commercial Subletting Best Practice Checklist

Before proceeding with any commercial subletting arrangement, verify these essential elements:

Headlease review: Confirm subletting is permitted under your alienation clause. Identify any rent restrictions, term requirements, or pre-agreed consent conditions. Note any provisions affecting sublease drafting such as required covenants or 1954 Act exclusion requirements.

Consent application: Prepare comprehensive undertenant information including financials, references, and proposed use. Submit formal written application allowing adequate processing time. Budget for landlord’s legal costs and any application fees.

Sublease terms: Ensure the term ends before headlease expiry (1–3 days minimum). Match or exceed headlease covenant strictness. Include appropriate forfeiture and re-entry provisions. Address service charge apportionment and insurance contributions.

Legal compliance: Follow 1954 Act contracting out procedure precisely if required. Arrange Land Registry registration for terms exceeding 7 years. Ensure SDLT return is filed within 14 days of completion.

Documentation: Obtain written landlord consent before completion. Execute sublease as a deed for terms exceeding 3 years. Complete any direct covenants or guarantee documents required. Provide undertenant with certified copies of relevant headlease provisions.

For guidance on related commercial property matters, see our guides on Commercial Office Lease agreements and Storage Facility Agreements.

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Why These “Free” Templates Are a Legal Risk

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Last reviewed: November 2025 | Next scheduled review: April 2026

Disclaimer: This guide provides general information about commercial subletting agreements in the UK and should not be considered legal advice. Specific circumstances require professional legal consultation. Laws and regulations current as of November 2025. Regular updates are recommended as legislation evolves.