A headlease of a property can allow a tenant to underlet (ie sublet) either the whole or part of a property, but do landlords have a right to charge a fee?
As a condition to the grant of the underlease, the landlord will normally need to give its prior written consent to the underlease in the form of a licence to underlet.
The licence to underlet allows the landlord to impose obligations relating to the underlease. For example, the landlord will normally want any rent reviews in the underlease to be consistent with the reviews in the headlease and an express provision not allowing the undertenant into occupation of the property before the underlease is granted.
The headlease of a property will typically provide that the tenant will be responsible for paying the landlord’s costs and expenses associated with the licence to underlet.
In two recent cases a tribunal confirmed that notwithstanding the absence of an express provision in a headlease, a landlord was entitled to make a charge for the costs incurred consenting to a underletting of a property, provided that the amount of the charge was reasonable. Whether the charge actually demanded was reasonable was not considered. A landlord will not be unreasonably withholding its consent to underlease if the tenant refuses to pay the landlord’s reasonable charge.