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Subletting: Advising residential landlords

Anna Bennett reviews the options open to landlords whose tenants are subletting the property, and the problems they might encounter with holiday sublets

8 June 2017

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Subletting is an issue that may affect many landlords, whether they be a large-scale social landlord or an ‘accidental landlord’. Landlords may only become aware of the issue when carrying out their obligations under the lease – for example, when attempting to gain access for gas safety checks – or they may be alerted to problems when neighbouring residents complain about the conduct of the subtenant.

Generally, clients are not too concerned about lodgers or tenants subletting part of the property; problems tend to manifest when the whole of the property has been sublet.

Long-term subletting

Subletting the whole of the property will remove the security of tenure for a secure or an assured tenancy, as the tenant will not be occupying the property as their only or principal home. For old-style secure or assured periodic tenancies, this enables the tenancy to be terminated by notice to quit (NTQ) and this will give rise to a mandatory claim for possession.

Notwithstanding this, it is usually sensible to serve a notice of seeking possession (NOSP) for breach of tenancy by non-occupation and subletting, marked without prejudice to the NTQ so that the client can rely upon breach of tenancy in later proceedings as a fallback position.

For assured shorthold tenancies (ASTs), if the tenancy is periodic then it may be more straightforward to serve a section 21 notice seeking possession (NSP), and thereafter issue proceedings under the accelerated procedure. Social landlords need to be mindful of the provisions of part 3 of the Pre-Action Protocol for Possession Claims by Social Landlords – notwithstanding the deregulatory measures brought into force by the Housing and Planning Act on 6 April 2017.

For fixed-term ASTs, the position will depend on the terms of the tenancy agreement. A well-drafted fixed-term AST will contain a form of break clause for when the tenant has lost security of tenure, which should enable the landlord to serve a section 21 NSP to end the tenancy. In the alternative, given the tenant is in breach, the landlord can serve an NOSP on ground 12 of the Housing Act 1988.

Shared owners will be subject to a complete prohibition on subletting until the tenant has staircased up to own 100 per cent of the lease. They are treated as assured tenants up until that point and the terms can be enforced in the same way.

For leaseholders, the position will depend on their lease and whether subletting is prohibited or otherwise. Note that for leaseholders who bought their properties under right to buy, subletting is normally permitted (with conditions). Depending on the terms of the lease, a section 146 notice may be served setting out the breach of lease. Clients will need to be advised of the potential dangers of waiver post service of the section 146 notice.

Short-term and holiday sublets

Short-term sublets present a particular problem for client landlords, both in the types of complaints received from other residents and in proving that it is reasonable to obtain possession. Nemcova v Fairfield Rents Ltd [2016] UKUT 303 (LC) (6 September 2016) provides guidance which may assist, particularly in leasehold cases.

The residence clause in Nemcova was that the leaseholder was ‘not to use the Demised Premises or permit them to be used for any illegal or immoral purpose or for any purpose whatsoever other than as a private residence’.

The tribunal accepted that the clause contemplated that persons other than the lessee might use the premises and that there would be no breach so long the property was being used as a private residence. However, the duration of the occupier’s occupation was material: very short-term lettings of days and weeks could not be considered occupying as a private residence as there was not a sufficient degree of permanence.

For secure and assured tenancies, this potentially adds a further clause which may have been breached, depending on the wording of the residence clause.

For shared owners, the model form of shared ownership lease specifies that the property should not be used as anything other than a private residence in single occupation, so the Nemcova case is directly relevant and this will apply after the lease has converted to a long lease.

For long leases, whether Nemcova is applicable will depend on the residence clause in the lease. Note that for leases bought under right to buy, the model term relating to use of the premises requires the leaseholders ‘not to use or permit or suffer to be used the demised premises or any part thereof other than for residential purposes’. This wording is distinguishable from ‘private residence’; however, it leaves open a potential argument that, by analogy with Nemcova, residential purposes cannot include use as what is effectively a holiday let.

 

Anna Bennett is a solicitor in the housing management department at Devonshires Solicitors

@Devonshires

www.devonshires.com

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Property Landlord & Tenant Residential

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subletting