Subletting Your Property in the UK: Everything You Need To Know

Subletting is growing more common in the property rental market, as as a property investor, you too can make money by subletting. Subletting is part of the rent-to-rent investment strategy that enables entrepreneurs to start making money from property without a large upfront cost. But what exactly is subletting? Perhaps you have heard it is illegal, but this is only the case when doing it without permission. Many landlords are happy for people to sublet their properties as long as a prior agreement is in place. Read on to find out everything you need to know about subletting.

Table of Contents

What is Subletting?
Is Rent-to-Rent the Same as Subletting?
Is Airbnb Subletting?
Is Subletting Illegal in the UK?
What if My Tenant is Illegally Subletting?
Can you Sublet Commercial Property?
Subletting Leasehold Properties

What is Subletting?

Subletting is when someone rents a property and then rents out part of or all of that property to a third party under a lease or rental agreement. This third party is known as a subtenant. Anyone who is not named on the tenancy agreement for a property is considered a subtenant, apart from short-term guests and lodgers. Tenants who sublet to subtenants are known as mesne tenants.

Lodging is different from subletting, as the lodger doesn’t have exclusive use of the property, so the landlord or another tenant could enter their room. This is the case whether the lodger pays rent or not. A subtenant pays rent but lives separately from the rest of the household. A lodger may or may not pay rent, but shares the home with the mesne tenant.

Is Rent-to-Rent the Same as Subletting?

In rent-to-rent agreements, the landlord or property owner agrees to let their property to someone else who will then let it to a subtenant. This can be a good option for some landlords who want guaranteed rent from a property, usually for a longer period than normal residential tenancies or Assured Shorthold Tenancies, and also want someone else to manage the property. They are happy for someone else to profit from their property as long as their rent is paid and they don’t have to spend time and money managing and maintaining it.

Is Airbnb Subletting?

If you offer a property you own for short-term rental on Airbnb or other platforms, this is not considered subletting. If you rent a property from someone else and then offer that property on Airbnb, then that is considered subletting and the landlord’s permission should be obtained beforehand.

Is Subletting Illegal in the UK?

Some people think that subletting is automatically illegal, but this is not true. A tenant can offer part or all of the property they rent to a subtenant, as long as they get the landlord’s permission first. If a tenancy agreement forbids subletting, or the landlord does not give permission or is never asked, then this is illegal subletting. Subletting can also be in breach of the terms of a buy-to-let mortgage or landlord’s insurance. Some insurers will not allow subletting on a standard policy so always check beforehand. If subletting a property means it contains three or more tenants, then this property may count as an HMO or House in Multiple Occupation and then a new set of rules will apply.

Tenants who are subletting to subtenants take on the responsibilities of a landlord, so they must keep the property up to date with all rules and regulations governing property rentals including health and safety. Mesne tenants are responsible for conducting right-to-rent checks and could be liable for penalties if these are not completed.

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What if My Tenant is Illegally Subletting?

If you own a property that you rent to someone else, and they have been subletting without your permission, you can take steps to evict the tenant as they have breached the tenancy agreement. This can get complicated, especially if the subtenant was not aware of the situation and acted in good faith. Seeking legal advice from a solicitor who specialises in housing and property is advised in such cases. You can reduce the potential for illegal subletting at your property by doing regular inspections, conducting thorough reference checks on new tenants, and making it clear that subletting is not allowed in the tenancy agreement.

Can you Sublet Commercial Property?

Subletting commercial property is not usual, especially for larger commercial units and retail properties with space for multiple businesses. As with other letting agreements, the landlord or property owner must consent to the property being sublet. The type of business that the subtenant runs from that property should also be considered for zoning and licencing requirements, as a retail space may not be suitable for office use and vice versa. Some businesses will also have different insurance needs, so this should be checked before any subletting agreement takes place. Failing to inform the landlord or property owner about a subtenant taking over part of a commercial space could invalidate their insurance.

Subletting Leasehold Properties

Leasehold properties can be sublet, although it is advised to check the leasehold agreement for any restriction clauses regarding subletting before proceeding with any subletting arrangement. If there is any ambiguity in the agreement or it doesn’t mention subletting at all, then check with the freeholder for clarification.

Subletting can provide landlords with consistent rent payments, relieve the burden of property management and help maintain occupancy levels in the property, although they do relinquish an element of control by allowing subletting in their property and there is an increased potential for conflict, disagreements and other complications. The decision to sublet a property is not one to be taken lightly by either the landlord or the tenant, and a sublease agreement should be created and agreed upon by all parties involved. As always, transparent communication between property owners, tenants and subtenants can help to establish a good relationship and mutual trust, which should help things run more smoothly.

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