Subletting is more common than many landlords realise. In many cases, a landlord may not even be aware that their property, or part of it, is being sublet.
What are the legal implications of subletting, and what does this mean for landlords and their rights?
What is subletting?
The property owner is known as the “head landlord” and is the person the original tenant rents from.
Where an original tenant agrees to accept rent from an individual who was not a party on the original tenancy agreement, it is known as subletting. The person subletting has no legal relationship with the landlord, they are considered to be the original tenant’s lodger, and as such, have the same rights as a lodger. Meaning the sub-tenant is not a tenant and does not have the same rights as one.
Whether you have willingly sub-let your property or not, many mortgage providers do not allow subletting which could have the effect of voiding any policies associated with the property and result in the mortgage company taking action to withdraw the loan.
Many buy to let policies do not allow subletting and doing so may have the effect of them becoming void or withdrawing your entitlement to make claims if they arise. If you do find out that your original tenant has been subletting and you inform your insurer, they may increase your premiums or where it is not permitting at all, cancel it entirely. If that is the case, you may need to find a new insurer which can be time consuming and expensive.
Is subletting different to lodging?
In cases where the original tenant has sublet the property, they are technically considered your tenant’s lodger. The lodger and the landlord have no legal relationship whatsoever.
What it does mean is that your sub-tenant has what is known as “lodger’s rights” which are written into law and covered by statutory rights. It is always wise to obtain independent legal advice about the options available to you before taking any action, such as evicting the lodger.
Subletting with a landlord’s permission
Subletting is not illegal and many landlords allow it. There are some tenants who make a business out of subletting properties and it can make money for both the landlord and the tenant, but with anything, there is a risk involved.
If your tenant asks you for permission to sublet, you will need to consider whether this is the right thing for you.
If you have a good tenant and you want to keep them, you may be inclined to agree. Factors to consider include what you would do if your original tenant moves out and you have no contact with the sub-tenant who wants to stay; if the original tenant fails to ensure the sub-tenant leaves before they vacate, you may have to follown an eviction process.
You may decide that subletting carries too much risk and uncertainty. In which case, there is no obligation for you to agree to the sublet.
When does a subtenancy end?
A subtenancy will usually come to an end when the original tenant’s contract ends. If the subtenant wishes to remain in the property, then the landlord can draw up a new tenancy agreement and the subtenant will become the main tenant.
How can a landlord avoid subletting?
You may be totally against subletting, many landlords are. There are steps you can take to help prevent it from happening in the first place, or discovering the sub-let as soon as it happens:
- Carrying out regular property inspections could act as a deterrent.
- By making friends with the neighbours, taking time and talking to them between lettings and during inspections. Giving the property’s neighbours your contact number may impose a sense of civic and neighbourly responsibility. If you have built up a rapport with them, should any changes to your property’s personnel take place, they are more likely to give you a call.
- Put a clause in the tenancy agreement which strictly prohibits subletting. It the clause is breached, then you have grounds for a section 8 eviction.
- In cases where you charge extra fees or deposits amounting to more than 1/6th of the annual rent, known as a “premium”, this gives your tenant a right to assign the tenancy to someone else without your permission. It is generally advisable to avoid extra fees or deposit amounting to more than 1/6th of the annual rent.
- Developing a good relationship with a tenant is helpful. If they know they can talk openly to you about struggling to make rental payments or faults and repairs, they may be more likely to approach you if they are considering subletting the property.
- Make sure you undertake full tenant referencing and due diligence on all prospective tenants.
What can I do if a tenant sublets without permission?
If the original tenant has gone onto sublet the property without your permission, there are two main situations that typically arise:
The tenant rents out a room in the property and maintains their own occupancy at the same time.
This is generally the most common situation as it can occur when your tenant rents a property with more than one bedroom and their house/flatmate moves out. In cases where the subtenant pays their rent on time and lives peacefully without incident, you may decide to allow the situation to remain unchanged. If this is the case, it would be wise to draw up a tenancy agreement and refuse to accept any payment for rent until a proper tenancy agreement is in place.
2. The tenant rents out several rooms or the whole property whilst living elsewhere.
In cases where the sub-tenant believes your original tenant is their landlord, then any issues with the property may go unreported and therefore unresolved. This situation can quickly become complex and costly for the landlord if they are losing control of their property.
If you discover your tenant has sublet without your permission, there are a number of steps you can take:
- Contact the original tenant before taking action to understand the situation.
- If, after you have spoken with the original tenant the subtenant remains in the property, you should make the subtenant aware of the situation, and either ask them to vacate the property or draw up a new tenancy agreement directly with them.
- If the subtenant refuses to voluntarily leave the property, take legal advice on your options are you may have to start eviction proceedings.
If the tenant sublets to numerous people, the property may become an illegal Home of Multiple Occupation (HMO). In cases where there are three or more tenants, it is a legal requirement for the HMO to have a licence from the local authority and subletting could fall foul of this provision leaving you some difficulty.
Subletting social housing
The kind of tenancy someone has determines whether or not they can be prosecuted under criminal law for subletting their home.
If the landlord is a local authority, criminal offences apply to unlawful subletting where a secure or flexible tenancy is concerned. They do not apply to introductory tenancies, a demoted tenancy or a family intervention tenancy.
If the landlord is a housing association, criminal offences of unlawful subletting apply to secure, assured, assured shorthold or demoted assured shorthold tenancies. They do not apply to shared ownership properties, nor do they apply to a family intervention tenancy.
What are the offences?
There are two offences of unlawful subletting. To have committed the first offence, a tenant must:
- Have broken a term of the tenancy by subletting all of the property. Partially subletting the property counts, but in cases of secure or flexible tenancies it only applies where the person subletting did not obtain the landlord’s written consent; and
- No longer reside in the property as their principal home; and
- Have sublet the property knowing they were breaking the terms of the tenancy agreement.
The second offence differs from the first offence in that it is enough for a tenant to know that subletting is against their tenancy agreement. The second offence requires the individual to have acted dishonestly by subletting. This means, in cases where the tenant has made money from the subletting then it is considered likely they will have acted dishonestly.
What are the penalties?
If a magistrates court finds someone guilty of the first offence, they can be fined. There is no maximum fine.
An individual can be tried for the second offence of acting dishonestly whilst unlawfully subletting at a magistrates court or the Crown Court. A magistrate can order a term of six months in prison, or a fine. And sometimes, both. The Crown Court has a maximum penalty of two years imprisonment or a fine, or both.
Unlawful profit order
Where an individual is found guilty of unlawful subletting offences, the court can make what is known as, an unlawful profit order. This requires payment of the profit made during the subletting to the landlord.
The court will decide how much is payable with the maximum amount calculated on the total profit minus any rent or service charges that was paid by the original tenant over the course of the sublet. Interest can be added if the amount due is not paid on time.
In criminal cases where an unlawful profit order has not been made, it is still possible for the landlord to apply to the civil court for one. A civil court is either a County Court or High Court.
The court will look at evidence to show the original tenant is living elsewhere, whether they retain any possessions at the sublet property, and the arrangements made with the people living there. The court uses the same method of calculation for the sum payable as for a criminal case. Both the criminal court and the civil court can order dual unlawful profit orders but it can only be for the amount that exceeds the sum payable under the criminal order, or the amount which the landlord has failed to recover.
Is there a defence?
If you can convince the magistrates or a judge that you have not committed the offence as charged, there are limited defences available.
For the first offence, if you can prove someone forced you to sublet the property using violence or by threatening such against you or a family member, then you may be able to use this as your defence.
It can also be a defence if the person you sublet to was entitled to apply to the landlord or court for a tenancy themselves or for it to be transferred to them – e.g. where a relationship breaks down.
There is absolutely no defence to the second offence where there is dishonesty.
What does subletting mean?
Subletting occurs when an existing or original tenant sublets all or part of their home to a third party. Most tenants need written permission from the original or ‘head’ landlord before they can sublet.
Is subletting allowed?
Most privately renting tenants require the written consent of their landlord before subletting. It is advisable before setting off down the subletting road that the tenant check their rental contract. In cases of subletting without written consent or in contravention of an explicit clause in the contract, it would be a breach of the tenancy agreement.
Can landlords take action against tenants for subletting?
Landlords can take legal action against a tenant in cases where they sublet unlawfully. Unlawful subletting takes place where all or part of the property is sublet to a third party without first obtaining written consent, or is not permitted to sublet but does so anyway.
The matters contained in this article are intended to be for general information purposes only. This article does not constitute legal advice, nor is it a complete or authoritative statement of the law, and should not be treated as such. Whilst every effort is made to ensure that the information is correct, no warranty, express or implied, is given as to its accuracy and no liability is accepted for any error or omission. Before acting on any of the information contained herein, expert legal advice should be sought.