Illegal Subletting of Commercial Property – What Can You Do?
Picture this. You own a commercial property and decide to rent it out to someone else. You then find a suitable tenant, get the relevant lease drawn up, they move into the property and continue to pay rent etc in accordance with the lease. It is later brought to your attention that your tenant has sublet your property out to a third party, without your knowledge or consent. What can you do? In most cases, the ‘blissful ignorance’ approach can be of the benefit of both parties, where the rent is being paid on time and no problems arise. However, where the sub tenant is causing damage or issues, or rent payments start to become irregular, it is important that you, as a landlord, are aware of your property rights.
This article covers the essentials: what to look for in the lease, handling a breach, forfeiture and eviction. Importantly, as a landlord, it covers what to do when things go wrong to make sure your actions do not backfire.
Let’s take a look at each of these points
- Read through the original lease
It is very important that you check through the lease between you and the original tenant before taking any action; look for a clause detailing whether or not the tenant must attain your permission to sublet or not. In most cases where the lease states that permission is required, this permission cannot be unreasonably refused so in the majority of cases would be allowed. Where the lease does not mention subletting, and is not a lease of a fixed term, it is presumed that subletting will not be permitted, so even where a tenant asks for permission you are able to refuse on any grounds.
- Is there a breach of the property lease?
Once you have looked through the lease and identified whether or not the tenant in question has breached their lease you may have the choice to terminate the lease and evict both the tenant and the subtenant. This leaves you with options to go about it, depending on the situation:
- Talk to the original tenant and try to come to an amicable resolution. It is likely that when confronted, most will admit their wrongs and bring the subletting to an end.
- If this does not work, try to talk to the sub tenants to assess the situation and find out what really going on. You may be surprised to find out your tenant may have been pretending to be the landlord of the property!
- In some cases, both you and the sub tenants may be happy to carry on the arrangement without the interference of your original tenant. If this is so, you could draw up a new lease with the sub tenant and serve the original with notice to evict.
- Forfeiture clause for a commercial property lease
If after trying to resolve the situation you are still adamant that you do not want either the tenant or the sub tenants in your property, it is possible for you as the landlord to serve written notice seeking back possession of the property.
Caroline, commercial property expert at Hillyer McKeown added, “Most commercial leases have a forfeiture clause which can be exercised in cases where the tenant has breach a covenant of the lease. A Section 146 notice of the Law and Property Act 1925 must first be issued to commence forfeiture proceedings.”
The S146 notice details:
- Description of the alleged breach.
- Requirements for the leaseholder to remedy the breach where possible.
- Requirements for the leaseholder to make compensation in money for the breach.
The tenant will then be given ‘reasonable time’ to act on this notice and remedy the situation, however, if this is not done in the time period then court action may be taken.
Best Practice Methods for Evicting Tenants
Do take the right steps:
- When delivering notice, ensure you can prove to the courts that it was delivered. You can do this by hand delivering and requiring a signature, photo or video evidence, or serving two notices from different post offices, attaining a Certificate of Posting from each.
- Give adequate notice in writing to the affected parties.
- Try to remain calm and do not take the law into your own hands, as in some cases forfeiture can get quite messy and be very frustrating.
Don’t take the law into your own hands:
- Turn up at the property unannounced and try to physically remove the tenants.
- Remove their belongings from the property.
- Cut off access to utilities such as gas and electric.
- Change the locks or make threats to the tenants.
Understanding property leases and what the small print means when situations change can be tricky to deal with. If you would like advice, please contact our Head of Commercial Property, Caroline by email or phone for a free, no obligation discussion about your situation.