You’ve been a fair landlord – abided by the terms of the lease, been fair to your tenant on rent reviews so you expect the same in return?
You visit the property to make sure all is well – but wait! You’ve caught a burglary taking place or perhaps just a trespasser? You gingerly enter the property, with your phone at hand to make that emergency call if necessary – to find someone working away, bold as brass, wondering what you are doing there?!
A quick series of questions establishes they are being rented part of the property (sometimes called under-letting) Thus meaning they are an unauthorised sub-tenant.
How did this happen? Does the lease allow under-letting?
Some leases do not allow under-letting at all.
Where a lease allows underletting, it usually states that it will only be permitted with the Landlord’s prior written consent. Usually, a formal licence is entered into between the landlord, tenant and sub-tenant, and the sub-tenant’s guarantor if they have one.
If the lease states the landlord’s consent must be obtained but does not make this subject to a requirement that it must not be unreasonably withheld, then the landlord is free to withhold its consent whether reasonable or not. However, Landlords should always be aware that a too-tight alienation clause may have an adverse affect on the rent review (if any).
It is more usual for landlord’s consent to be required and such consent must not be “unreasonably withheld”. As with assignments, what constitutes consent being “unreasonably withheld” is usually what is reasonable in the circumstances. If the landlord does not respond to a tenant’s formal application for consent within a reasonable time, that can be deemed to be an unreasonable withholding of consent.
What does this means for you?
If the tenant has been in occupancy for a while, they may be able to renew a tenancy of their own under Part II of the Landlord and Tenant Act 1954
As a landlord you can bring a claim against a former tenant for breach of the covenant to give vacant possession, but the responsibility to remove the sub-tenant remains with the landlord.
What can I do?
Prior to lease expiry, if you are not certain who is in the premises, or for the avoidance of doubt, notice can be served on the tenant requiring them to provide information regarding any other occupiers in the premises (section 40 Landlord and Tenant Act 1954).
A rent stop should be put in place on the immediate tenant’s lease to preserve the right to forfeit for breach of the alienation covenant where any unauthorised sub-letting is found
What if my tenant doesn’t leave?
A former tenant that remains in occupation after the expiry of the lease (in a contracted out lease) is another headache for a landlord.
Swift action is called for, otherwise you run the risk the former tenant will become a protected business tenant. Other issues may also arise, e.g. the landlord’s claim for dilapidations being limited, where tenant alterations are only required to be reinstated with prior notice.
Where former tenant and landlord have attempted to negotiate a new lease, but were not successful, the landlord can offer a formal tenancy at will agreement. This avoids a periodic tenancy arising (which potentially generates business tenancy rights).
If the landlord wants the premises back unoccupied, then possession proceedings will normally be required. The good news is, the landlord will be able to claim mesne profits from the former tenant for use and occupation for the period in which the tenant remained. The rate of such sums is at double value – which is more generous to landlords.