Licence to Sublet Template

Licence to Sublet Template Guidance Notes

A licence to sublet is often required by a landlord under a lease where the tenant wants to sublet its property to another party. The template which has been produced is based on the assumption that the lease out of which a sub-lease is being created, is commercial.

Note that this document excludes provisions for a tenant’s or sub-tenant’s guarantor. If the tenant and or the sub-tenant has a guarantor, such provisions (relating to the guarantor’s obligations) will often be incorporated into the licence.

We would advise that the licence is cross checked against the lease and amended accordingly in order to ensure that the correct conditions and obligations are reflected in the same.

Note that this template is in respect of subletting commercial property as a whole as opposed to part only.

Should the lease be contracted out of sections 24 to 28 of the Landlord and Tenant Act 1954 (meaning that the tenant would not have an automatic right to a new lease) then the sublease should also be contracted out, in which case the licence template should be amended accordingly to reflect the tenant’s and subtenant’s additional obligations in respect of the same.

Please further note the following in respect of the template:

• Relevant text will need to be inserted/replaced within the square brackets where indicated throughout the document.
• Cover page –If there are guarantors for the tenant and subtenant, they would normally be added as parties to the agreement.
• Top of page 1 – complete the details accordingly and delete the relevant text where appropriate, the text will need to be revised to reflect whether the party is a company or an individual.
• Page 1 – Background – This confirms that the licence is in addition to the lease and sets out the brief context as to why the licence is required.
• Clause 1 – this sets out the terminology used and interpretation under the licence.
• Clause 1.4 – delete ‘England’ or ‘Wales’ as appropriate in respect of the definition of ‘working day’.
• Clause 2 – this clause is where the formal consent is provided by the landlord for the subletting.
• Clause 2.2 – It is common practice for the consent to be limited in time, 3 months is typical.
• Clause 3 – This clause sets out the conditions which must be complied with on the part of the subtenant and / or tenant in respect of the grant of the sublease.
• Clause 3.2 – This clause provides that the tenant will need to liaise with the landlord following completion of the sublease to give them notification in respect of the same (these usually mirror the notification requirements for sub-lettings referred to in the related lease, therefore you may delete this clause if no such reference is made.  The time frame at the start of the clause and the figure referred at clause 3.2 (c) would also normally be found in the lease).
• Clause 4 – It is common practice for leases to require that a tenant pays the landlord’s costs when applying for a form of landlord’s consent and such a requirement is reflected in the licence. Note that this section should be cross checked against the lease and amended accordingly to reflect the same.
• Clause 5 – this states that any right of re-entry to the property, which the Landlord would have under the lease, extends to being exercisable if a condition under the licence is breached.
• Clause 6 – If there are any breaches of the tenant’s and / or subtenant’s obligations under the licence each relevant party will need to reimburse the Landlord for any liabilities/reasonable costs they incur in respect of the same.
• Clause 7 –  This clause prescribes the way in which notices are to be served by each party.
• Clause 10 – This clause will not be required if the sublease does not need to be registered at the Land Registry. The sublease will need to be registered at the Land Registry if the sublease term is for more than 7 years.
• Clauses 10 (a) and (c) – A typical time frame for applying to register the sublease and sending the landlord and tenant official copies is one month.
• Signature page – The signature clauses are drafted on the assumption that the parties entering the agreement are companies, if they are individuals then the words ‘acting by’, ‘director’ and ‘a director’ should be removed accordingly.