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Subletting


"My tenant has asked me to agree to a subletting of its premises at a lower rent than it is paying. Its solicitors say I have to agree as I will continue to receive the full rent under the main lease. Is that correct?"

Not necessarily. While you must not unreasonably withhold consent, you are entitled to consider your own commercial interests.

Your tenant’s solicitors are correct to say that your tenant will continue to pay the full rent under the main lease, while collecting money from the subtenant, but there are other factors you should consider.

If the rent under the sublease is lower than under the main lease, you could expose yourself to the risk of not being able to recover the full amount of any arrears that may be owed by the tenant in future. That would be a reasonable basis for withholding consent.

If the proposed rent is lower than the market rent then this could affect the value of your interest in the property.

It will be reasonable to withhold consent if you intend to realise the value of the reversion in the foreseeable future.

If you have no such intention then it is likely that a court would find that you had unreasonably withheld consent.

If it is a condition of the main lease that any sublease must be at market rent then your tenant will need to prove that the agreed rent is at the market rate. If it does not, then you can withhold consent.

Finally, although generally you only need consider your own interests, there may be circumstances where you need to take the tenant’s position into account. For example, if your tenant has been trying to market the property unsuccessfully, the court is likely to find that the harm you would suffer as a result of a sublease with a lower rent is outweighed by harm to the tenant of not being able to sublet.

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