Q&As

A housing association seller has a headlease from the council. The headlease contains an absolute prohibition on underletting. The particular concern is that this could create an issue in future if the buyer/successor-in-title wishes to exercise the right to acquire and apply for a lease extension. The council will not consent to a deed of variation to remove the prohibition on underletting insisting that the statutory rights are sufficient. Does a preserved right to acquire/statutory right to extend a lease prevail over the express provisions of the head lease to the contrary?

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Produced in partnership with Chris Bryden of 4 King’s Bench Walk
Published on LexisPSL on 25/02/2021

The following Local Government Q&A produced in partnership with Chris Bryden of 4 King’s Bench Walk provides comprehensive and up to date legal information covering:

  • A housing association seller has a headlease from the council. The headlease contains an absolute prohibition on underletting. The particular concern is that this could create an issue in future if the buyer/successor-in-title wishes to exercise the right to acquire and apply for a lease extension. The council will not consent to a deed of variation to remove the prohibition on underletting insisting that the statutory rights are sufficient. Does a preserved right to acquire/statutory right to extend a lease prevail over the express provisions of the head lease to the contrary?
  • Prohibition on underletting generally
  • Right to acquire generally
  • Prohibition on underletting in headlease
  • Exceptions to right to acquire
  • Provisions restricting right to acquire
  • Lease to the tenant

Prohibition on underletting generally

An absolute prohibition on underletting is a clause contained within the headlease that prevents the headlessee from allowing the premises to be underlet (often referred to as a sublease), meaning that the headlessee cannot create an interest in its lease which is then let by it to a subtenant. Some leases will contain conditional or qualified prohibitions against underletting, requiring the consent of the superior landlord. In such circumstances, section 1(3) of the Landlord and Tenant Act 1988 (LTA 1988) imports a provision that such consent cannot be unreasonably withheld, due to the operation of section 19(1)(a) of the Landlord and Tenant Act 1927. However, these provisions do not apply to an absolute prohibition on underletting.

Right to acquire generally

There is reference to a preserved right to acquire, however, this is not a concept known in law—there is a preserved right to buy which will be obtained by a secure tenant of a local authority becoming an assured tenant of a housing association upon transfer of housing stock from the former to the latter and which can transfer once to another property also owned by the housing association.

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