Sub Lease Contract Template for England and Wales

A sub lease contract is a legal agreement that allows you, as an existing tenant, to rent out part or all of your leased property to another party while remaining bound by your original lease terms. Under England and Wales law, this arrangement creates a three-way relationship between the head landlord, yourself as the sub-landlord, and your sub-tenant.

When do you need this document?

You need a sub lease contract when your business circumstances change but you cannot or do not want to terminate your existing lease. Common scenarios include downsizing your operations while retaining some space, sharing premises with another business to reduce costs, or temporarily relocating while maintaining your lease obligations. The document is also essential when you want to generate rental income from unused space, provided your head lease permits subletting. Before proceeding, you must carefully review your original lease to ensure subletting is allowed and understand any consent requirements from your head landlord.

Key legal considerations

Several critical legal factors must be addressed in your sub lease contract. The sub lease term cannot exceed your remaining lease period, and the sub-rent can be set at market rate regardless of what you pay under the head lease. You remain liable to the head landlord for all original lease obligations, including rent and maintenance, even if your sub-tenant defaults. The permitted use clause must not conflict with or exceed the restrictions in your head lease, and you should include provisions for insurance, repairs, and compliance with health and safety regulations. Consider including break clauses that align with any breaks in your head lease, and ensure the sub-tenant understands they have no direct relationship with the head landlord. Assignment and further subletting restrictions should mirror or be more restrictive than those in your original lease.

Legal requirements in England and Wales

Under the Landlord and Tenant Act 1954, commercial sub-tenants may acquire security of tenure, potentially complicating future possession proceedings. The Law of Property Act 1925 requires that leases exceeding three years must be created by deed to be legally effective. If your head lease requires landlord consent for subletting, you must obtain this before completing the sub lease, as proceeding without consent could constitute a breach. The Landlord and Tenant (Covenants) Act 1995 governs covenant enforcement and may affect your ongoing liabilities. For registered leasehold interests, the Land Registration Act 2002 may require registration of the sub lease if it exceeds seven years. Additionally, the Landlord and Tenant Act 1985 provisions regarding repairs and fitness for habitation apply to residential sub-lettings, while commercial arrangements focus more on the specific terms negotiated between parties.