Subletting is common — a shop within a building, a portion of a plantation, a floor of an office. Section 54 of the Land Registration Act governs it, and it contains two provisions that decide most sublease disputes.
Section 54(1) and (3) — form, and the Act applied
Where the proprietor of a lease sublets for a term of three years or more, he may do so by executing a sub-lease in the approved form.
Section 54(3) then applies the machinery: the provisions of the Act relating to leases, lessors and lessees apply to sub-leases, sub-lessors and sub-lessees, with the necessary modifications and exceptions.
So everything in Part VI on registered leases carries across — the registration threshold, the implied powers and covenants, and the six-month re-entry trigger.
Section 54(2) — the mortgagee must consent
Where a lease is subject to a mortgage or charge, no sub-lease of that lease is valid or binding against the mortgagee or the chargee unless he consents to the sub-lease before it is registered.
This mirrors section 49(3) for head leases, and it catches subtenants constantly.
If the head lessee has mortgaged the lease and the lender did not consent before your sublease was registered, your sublease does not bind the lender. Should the lender later exercise its power of sale — available on one month’s default plus one month’s notice — the purchaser can take free of you.
Search the head lease title. Identify every registered mortgage or charge. Obtain the mortgagee’s written consent, and make sure it is given before your sublease is registered. For anything of commercial value, treat this as a condition of signing.
Sections 54(4) and (5) — the sublessor’s promise
In addition to the covenants implied in every lease, there shall be implied in every sub-lease the following covenant by the sub-lessor with the sub-lessee and his transferees:
— that he will, during the term granted, pay the rent reserved by and perform and observe the covenants and agreements contained in the original lease, and on his part to be paid, performed and observed.
This is a real protection for a subtenant. The sublessor promises to keep the head lease alive and in good standing. It is binding on the sub-lessor, his executors, administrators and trustees (s 54(5)).
It gives you a claim if the sublessor defaults. What it does not do is stop the head lease ending.
Section 54(6) — the sublease dies with the head lease
Where a lease is determined by (a) forfeiture, (b) operation of law, or (c) disclaimer by the trustee under the Insolvency Act — a sub-lease of that lease is determined at the same time.
This is the single most important risk in taking a sublease. Your interest is carved out of the head lease and cannot outlive it. If the head lessee is forfeited, or becomes insolvent and the trustee disclaims, your sublease ends automatically — and you are left with a damages claim against a party who has just been forfeited or gone insolvent.
For a State lease, the head lease can be forfeited for six months’ unpaid rent, unpaid fees, breach of a covenant or condition, or a grant obtained by knowingly false statements.
But section 122(4) of the Land Act 1996 requires copies of a forfeiture notice, and of a notice to show cause, to be served on all persons who, to the knowledge of the Departmental Head, have or claim an interest in the land. A registered sublessee is such a person. Registration is what puts you on the Departmental Head’s radar — another reason to register.
Protecting yourself as a subtenant
- Search both titles — the head lease and any mortgage over it.
- Get mortgagee consent in writing before registration (s 54(2)).
- Register the sublease. Over three years it must be registered; below that it may be, and registration is what makes you visible for section 122(4) notices.
- Check the head lease terms — a sublease cannot give you more than the head lease permits, and the purpose condition binds you too.
- Obtain Ministerial approval where the sublease term or remaining term exceeds five years, or is five years or less with an option taking it past five — that is a controlled dealing, void without approval.
- Build in a warning mechanism — a contractual right to be notified of any default under the head lease, and a right to remedy it and set off what you pay.
- Consider a caveat in the interval before registration.
Section 55 — transferring a registered lease
A registered lease may be transferred by instrument in the approved form, with the consideration specified — and where it is not money, the form amended to state concisely the nature of the consideration. On registration, the transferee takes the transferor’s interest with its rights and becomes subject to its liabilities.
Assigning a lease of a State lease with more than five years to run is also a controlled dealing requiring Ministerial approval.
Sections 52 and 53 — short forms
A covenant expressed in a short form from Column 2 of Schedule 3 implies against the lessee the full covenant in Column 3, as fully as if set out in the lease. And in a lease, the words “together with a right of carriage-way over the road delineated and coloured brown on the said map” have the effect of the full words in Part 2 of Schedule 2.
Read the Schedules when reading a registered lease — a short phrase can carry a long obligation.
Sources
- Land Registration Act (Chapter 191) — ss 49–55; Schedules 2 and 3; Part VI
- Land Act 1996 — ss 122, 127–129
- Insolvency Act (Chapter 253)
- Landlord and Tenant (Miscellaneous Provisions) Act (Chapter 189)
Before relying on anything here, read the current text of the Land Act 1996 and check for later amendments. If a decision matters to you, get advice — start with the Office of the Public Solicitor, or find a firm in the law firms directory.