There are different consequences to the sub-tenants interest if a headlease is forfeited or surrendered.
Our Property Litigation Solicitors explore the impact on a sub-tenant in both scenarios.
What happens to sub-tenants interest if the headlease is forfeited?
If the headlease is forfeited, this will automatically end a sub-lease, which will have consequences for the sub-tenant as they stand to lose their interest.
The subtenant may wish to remain in occupation of the property, and if they do, they can apply for relief from forfeiture under section 146(4) of the Landlord and Tenant Act 1925.
If a subtenant does wish to apply for relief from forfeiture, the application should be made within six months of the landlord taking possession.
It is important to understand that the parties cannot agree to relief without the court's consent and that the court has discretion over its granting.
What if the application is successful?
If the sub-tenant's application is successful, the court can grant a vesting order. This impacts "vesting…the property comprised in the lease" to the sub-tenant.
The court also has the power to determine the lease terms, which usually coincide with the terms of the forfeited headlease. However, the new lease will not be for a term longer than the original term of the sublease.
Any other sub-interests the sub-tenant has created will not be reinstated, as those will fall away. Despite sub-tenants having this ability to apply for relief from forfeiture, many sub-tenants are deterred from applying.
This is because the court can impose conditions on the lease, making it more demanding on the sub-tenant.
For example, the court may decide that the sub-tenant should make good the former tenant's covenant breaches.
Furthermore, the sub-tenant must bear the application costs, including the landlord's.
What happens to the sub-tenants interest if the headlease is surrendered?
When a headlease is surrendered, the impact is that the headlease will fall away, and the tenant under the sub-lease becomes the direct tenant of the superior landlord.
This effectively means that the subtenant will continue to occupy the property under the terms of the sublease.
However, if the superior landlord does not want to assume responsibility for the sub-leases and requires a full surrender with vacant possession, the tenant must agree to each sub-tenant's surrender.
What happens to the sub-tenant's interest if the headlease is disclaimed?
If the head lease is disclaimed on the head tenant's insolvency, it implies ending all of the intermediate tenant's rights and obligations.
The superior landlord will not become the direct landlord of the sub-tenant.
Instead, the sub-tenant will retain a set of rights to remain in occupation of the property, but this will be for a term no longer than the original term of the sublease.
It will also be based on the subtenant's compliance with the lease terms, including payment of all rent.
Sub-tenants are also open to applying for a vesting order.
The Court will grant an order on such terms that it thinks fit, and the order will make the sub-tenant the immediate tenant of the landlord.
Contact Our Property Litigation Solicitors
If you're a sub-tenant affected by a headlease being forfeited, surrendered, or disclaimed, contact our Property Litigation Solicitors for expert advice on protecting your rights and interests.
01619414000
More Property Litigation Law News and Advice
Blog
What Happens to Sub-Tenants if the Headlease is Forfeited, Surrendered or Disclaimed?
There are different consequences to the sub-tenants interest if a headlease is forfeited or surrendered. Our Property Litigation Solicitors explore the impact on a sub-tenant in both scenarios.
Read Blog
Blog
What Is A Private Nuisance?
In a landmark ruling on 1 February 2023, the UK Supreme Court clarified that how modern buildings are used can amount to private nuisance, impacting property owners, occupiers, and developers. Our Property Litigation Solicitors explain what a...
Read Blog
Blog
Nature of Easements
Easements are a key consideration for landowners and developers, as a failure to consider their implications properly may have the result of severely inhibiting a development scheme. This blog identifies common easements, examines how they are...
Read Blog
Blog
Residential Landlord Possession – What To Do If Your Tenant Refuses To Move Out
In most cases, a tenant will leave after the landlord has served a Section 8 Notice or a Section 21 Notice requiring the tenant to vacate the property. However, when the tenant fails to vacate, the landlord may be forced to proceed with Court...
Read Blog
Blog
Can My Landlord Take Back Possession Of The Premises I am Operating A Business From?
The location of your premises is often crucial to your business's success, particularly in the hospitality and leisure sector. Relocating can be expensive and disruptive for you and your customers. This raises the question: Can a landlord take back...
Read Blog
Blog
Break Clauses – Avoid the Pitfalls!
Break clauses are contractual provisions in a lease that allow either the landlord or tenant to bring the contractual term of the lease to an end early. On the face of it, a break notice appears to be a straightforward document, and it often looks...
Read Blog
Jennifer Hartley
Associate
Jennifer has 4 years of experience acting as a Property Litigation solicitor. Jennifer has specialist expertise in commercial and residential landlord and tenant disputes, lease renewals, forfeiture, dilapidations, rent arrears, and residential possession.
About Jennifer Hartley >