Sub-letting – Can your landlord/freeholder give you a hard time?

There has to be an express provision restricting sub-letting in the Lease and if there is no restriction then the Leaseholder is free to sub-let without any control. Many Leases include a covenant or promise whereby the lessee cannot sub-let without the prior consent of the landlord.

Usually such a restriction will say that the consent cannot be unreasonably withheld. If there is no mention of reasonableness in the covenant then statute implies a test of reasonableness. Section 19(1) of the Landlord and Tenant Act 1927 states that this kind of clause must always be read subject to a qualification that consent cannot be unreasonably withheld. A landlord who receives a written application for permission to sub-let must now reply formally, giving his decision within a reasonable time. If he refuses permission, he must give reasons. If consent is made subject to conditions, these conditions must also be reasonable. If the landlord doesn’t reply, or withholds permission on unreasonable grounds, the tenant can sue the landlord for damages.

Some people are surprised when finding out that their ability to sub-let be restricted in any way if a long leasehold interest has been purchased? After all you may have just paid several hundred thousand pound for a property. Why should there be any restriction on what you can do ? the main reason often put forward by landlords is that other Leaseholders in the block may be prejudiced if there is no restriction on sub-letting. This rather elitist argument develops in pointing out that the wrong type of occupiers could be brought into the building. A further point of view is that if most of the flats are occupied by people who do own their property they will not care as much about the standard of the building and as a result the value of the flats in the building could diminish.

Even if there is no restriction on sub-letting, there can be an indirect restriction somewhere else in the Lease. In some cases you may find, for example that the lease limits the use of the property. A typical example would be example, the flat may only be used by the tenant or his or her own family. That would effectively prohibit you from sub-letting.

Landlords and managing agents sometimes use the requirement in the lease for consent to require payment of costs for the work done in approving a sub-tenant. Sometimes these costs can be quite high ( we have seen it as high as £1000 ). Additional costs can be incurred because there is likely to be a requirement that the landlord to be given notice within a prescribed time frame ( often 21 days ) of any sub-letting, which means providing a copy of the sub-letting agreement and paying a fee for registration with the landlord’s solicitor. The registration fee is normally around £40 plus VAT.

You may ignore the provisions of the Lease and sub-let without any notification at all in the belief that the landlord or their agents will not be bothered to check who is living in a particular flat. You are however taking a significant gamble. If your judgement proves to be wrong and the landlord finds out serious trouble could be round the corner. Think “ penny wise pound foolish”.

What are the chances of a landlord finding out you may ask ? Usually it is because the sub-tenants do something that irritates the neighbouring flats or other people in the building leading to complaints to the landlord or their agents. If you are going to take the gamble and sublet without the landlords consent ( and we advise against this ) you better ensure that you reduce the risk of you neighbours complaining by insuring that your home is not used for any illegal activity and that your home is not used for commercial activity. Please be careful about your choice of sub-tenant ( regardless of what the lease says ) .

If your landlord does catch you out he/she may then demand that the sub-letting ceases. In fact in many cases such as this the landlord is duty bound to take action. If a fixed sub-letting has been entered into for a period of time that can be difficult to deal with. Come what may the costs are going to be high. An aggressive landlord could instruct solicitors to serve a notice threatening forfeiture of the Lease. You would then be at risk of losing your property unless the matter is remedied within a prescribed time frame (Forfeiture action can only take place with the permission of the Leasehold Valuation Tribunal or after obtaining a Court judgement. These restrictions were put in place to protect leaseholders from unscrupulous landlords seeking to determine their interest on frivolous basis and they tend to grant leniency towards a leasehold owner ). Even in your best case scenario where you manage to put things right you are going to be liable for a very expensive legal bill running into thousands of pounds. You will almost certainly live to regret not applying for consent in the fist place.