Residential Sublease (England and Wales)

What is a sublease agreement?

A tenant who is already renting a private residential property can use a sublease agreement to grant a tenancy to another tenant. The new tenant becomes a subtenant and the existing tenant will be the sublandlord.

The property will be used as a subtenant's home and main place of residence. This sublease agreement can be used in England*.

A different sublease agreement is available for use in Scotland.

What is the difference between a residential sublease agreement and a lodger agreement?

A residential sublease agreement is different from a lodger agreement. A subtenant will have particular rights as a tenant under a sublease agreement (including protection from unfair eviction). A subtenant will enjoy exclusive occupation of the relevant property, whereas a lodger will only have the right to use a certain space or room and the landlord will retain the right to occupy that space at all times.

The formal legal term for a lodger agreement is a 'licence to occupy'. A licence is an agreement that permits a person to do something. A licence to occupy (a lodger agreement) therefore permits a person to occupy a space or part of a property but does not grant a legal interest in the property.

What is the difference between a commercial sublease and a residential sublease?

A residential sublease will be used where the subtenant will live in the property and the property will be used as their home.

A commercial sublease will be used where the property will be occupied for business purposes only. Commercial subtenants have distinct and different rights and responsibilities (for example the requirement to undertake a health and safety risk assessment in relation to the property).

What is a guarantor?

A guarantor will agree to pay the rent in the event that the subtenant cannot or does not pay this. It is possible for the guarantor to be in an individual or a corporate entity (a company). This sublease agreement may include a guarantor as a party if desired.

What cannot be included in a sublease agreement?

A sublease agreement should not include any clauses which:

• restrict the legal rights of tenants
• attempt to waive or diminish the legal obligations of the landlord
• demand the payment of a deposit that is above the legal limits: a deposit must not exceed five week's rent - unless annual rent is £50,000 or more (in which case the limit is six weeks' rent).

What are the prerequisites of a sublease agreement?

Before the sublandlord grants the sublease, they should:

• check that the subtenant has the legal right to rent a property in the United Kingdom - this means that their immigration documents must be checked
• ensure that the property is in a safe condition - this will include checking that the relevant safety standards are met (such as gas safety, electrical safety and fire safety)
• obtain permission from their landlord
• ensure that there are not any restrictions imposed by their insurance policy regarding subletting
• check whether they need to notify the local council

A sublandlord may also request to undertake additional checks about:

• a subtenant's credit background
• any relevant references (e.g. from the subtenant's previous landlord)
• criminal record checks

Who can enter into a sublease agreement?

The sublandlord should ensure that they have permission to let the property from their landlord.

The subtenant must have the right to rent a property in the United Kingdom. This means that their immigration documents must be checked

Both of the parties should be over the age of 18 and have capacity. Capacity refers to a person's ability to make and understand decisions.

What can the duration of a sublease be?

The parties can agree upon a fixed term. Commonly, this will be a period of 6 or 12 months. After the fixed term, the sublease will usually convert into a periodic (rolling) tenancy.

This sublease is designed for use where the fixed term will not exceed 3 years. If the parties wish to create a sublease for a term exceeding 3 years, then there will be additional requirements and formalities.

If the parties would like to seek any about a sublease agreement for a term exceeding 3 years, they should seek specialist advice from a regulated lawyer.

What has to be done once the sublease is ready?

The parties should sign and date the agreement once it has been finalised. After the document has been signed, the parties should retain a version that contains the signature of each party. The subtenant may then occupy the property under the terms of the agreement.

What documents should be attached to the sublease agreement?

The agreement must include an inventory and schedule of condition should be completed and attached to the agreement before signing.

The sublandlord should also provide the subtenant with a copy of the master lease (the tenancy agreement held between the sublandlord and their own landlord).

How can a sublease agreement be terminated?

A subtenant can end a sublease agreement:

• if there is a clause in the agreement that allows them to end the agreement before the end of a fixed term - this is known as a break clause
• by leaving the property before the end of the fixed term
• by sending a 'notice to quit' (a written notice) - this can be sent once a fixed term tenancy has converted into a periodic (rolling) tenancy

A sublandlord can end a sublease agreement:

• by sending a notice after the tenant has been in the property for 4 months (by giving 2 months' notice to leave) - if there is a clause in the agreement that allows them to end the agreement before the end of a fixed term (this is known as a break clause)
• by sending a notice 2 months before the end of the fixed term- to prevent the agreement from converting into a periodic (rolling tenancy)
• where the landlord is relying on certain legal grounds* - including rent arrears or anti-social behaviour

A sublandlord should seek advice and/or obtain information about the termination process, required notice periods and the relevant legal grounds before ending a tenancy.

What should a sublease agreement contain?

A sublease agreement should include information about:

• the parties - the sublandlord, the subtenant and any guarantor
• definitions – this will define key information relevant to the tenancy such as the term, the rent amount and any deposit amount
• the property – the address and details of any outbuildings
• subletting – this will confirm that the property will be sublet to the subtenant by the sublandlord for the relevant term
• the subtenant's obligations – this will include important information including the obligation to pay rent and any other charges. It will also refer to any applicable restrictions as part of the tenancy (e.g. making alterations, subletting etc.)
• the deposit - this will include when and how any deposit must be paid. It will also declare and confirm that the sublandlord will comply with the regulations under the deposit protection scheme
• the sublandlord's obligations – this will include important information about the sublandlord's responsibilities including the need to maintain the property and carry out repairs
• the guarantor obligations (if applicable) – this will confirm that the guarantor shall be responsible for the payment of rent and other charges in the event of default
• termination – how the agreement may be ended

Which laws apply to a sublease agreement?

The following legal provisions are most relevant to a sublease agreement:

• The Law of Property Act 1925
• The Housing Act 1988
• The Unfair Terms in Consumer Contracts Regulations 1999, SI 1999/2083
• The Consumer Rights Act 2015
• Tenant Fees Act 2019
• The Landlord and Tenant Act 1985
• The Immigration Act 2016
• The Protection from Eviction Act 1977

A sublandlord should also consider safety/legal requirements relating to:

• Gas safety requirements - The Gas Safety (Installation and Use) Regulations 1998, SI 1998/2451
• Fire safety - Furniture and Furnishings (Fire Safety) Regulations 1988/1989, 1993 and 2010
• Electrical safety - The Electrical Safety Standards in the Private Rented Sector (England) Regulations 2020, SI 2020/312
• Safety alarms - The Smoke and Carbon Monoxide Alarm (England) Regulations 2015, The Smoke and Carbon Monoxide Alarm (Amendment) Regulations 2022)

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