Subletting business premises

If you're a landlord and your tenant wants to sublet the business premises, you'll need to create a Licence to sublet and think about these things.

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Why use a Licence to sublet

This is best shown by way of the following example. The landlord owns commercial premises and the tenant is leasing the premises for twelve years. In year six, the tenant decides to slim down their business activities, take a break or sublet the premises at a higher rent than his rent to the landlord.

The tenant needs to sublet part of the term of years left on the lease and becomes the sub-lessor. To be able to do this, the tenant must get formal consent from the landlord in the form of a Licence to sublet, which is signed by the landlord, the out-going tenant and the in-coming tenant.

The head landlord remains safe as the new tenant (the 'sub-lessee') is liable to the old tenant (the 'sub-lessor') and old tenant remains liable to the head landlord. 

Things to do before agreeing to sublet

Get details of the proposed new tenant. Ask for references, such as bank details, trade and get professional and character references.

The old tenant may consider asking for additional security from the new tenant, such as a guarantee or a deposit under a Rent Deposit Deed. This is a sum of money held as added security for the payment of rent and performance of obligations under the lease.

The new tenant may also wish to alter the premises to suit his own business. A Licence to alter and also a Licence to change use of the premises may also be required.  

A Licence to change use of the premises may be subject to planning consent.

Final checklist for Licence to sublet

Check that the lease will allow a tenant to sublet.

The old tenant can ask the new tenant for additional security ie rent deposit, guarantor, bank guarantee.

Would it be better for the tenant to assign rather than sublet?

Is a change of use proposed and will a Licence to change use be required?

Do you need to make for provisions of shared parts?

Do you need a Licence to alter?

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Create your License to sublet

Answer a few questions. We'll take care of the rest