7 things you need to know about Subletting your London Flat
With property prices on the rise, many home owners are choosing to rent out their property when life changes.
There are many reasons why you may wish to rent out your home, such as moving in with a partner or a short term job relocation. However if you own a flat, it may not be as simple as it sounds.
1. What does your lease say about subletting?
This is one of the key things to know. Back at the start of the leasehold tenure, the first leases were written in a time where subletting was unheard of. Home ownership and flat living were fairly new concepts and it wasn’t thought that people may be in a position to own more than one home but less than the whole block.
Therefore there wasn’t initially a clause allowing subletting or “underletting” as the leases often call it as it wasn’t necessary. While most of these leases have now been extended, depending on the legal advice given, this clause still may not have been added.
Alternatively some leases expressly forbid subletting of any kind.
Firstly you need to check the lease to make sure subletting is allowed and whether any restrictions or requirements are specified there.
2. What is subletting?
There is often some confusion over what subletting actually entails. In the truest sense, it means to let out your property to another party while you live elsewhere. Under many leases this is perfectly acceptable – subject to some requirements.
It becomes more complex should you wish to take in a lodger. This can still be classed as subletting, especially if you draw up a tenancy agreement and give them specific rights over parts of the flat (such as their room). However this is legally known as “alienation” as you have sublet part of the property. Many leases do not allow this in any form.
The only solution is a very carefully worded licence rather than a tenancy agreement. This protects your rights as the landlord without giving the tenant any specific or sole rights over any part of the property.
3. But this doesn’t apply to garages, right?
Wrong – the alienation clause does also apply to garages, parking spaces and any other out-buildings which may be included within the demise of your lease. If you decide to sublet your flat you would need to include all of these within the tenancy. Equally if you are lucky enough to own a flat with a garage or parking space but have no vehicle, legally you are not allowed to sublet the parking area alone.
The only time this may be permissible is if there was a separate lease on the garage or parking space. In that case, you would need to check the terms of the relevant lease as the subletting clauses may differ from your flat lease.
4. How long can I sublet my home?
There is usually no limit on the length of time a property can be let (unless your lease says different). However a good lettings agent will provide advice on a sensible initial rental period and the ongoing contract.
However really short lets can create a problem.
Most leases contain a clause which requires the property to be used as a “private dwelling for a single household”. There is also usually a clause which prohibits a business being run from the premises.
These two clauses have sparked some discussion when flats have been sublet using companies, such as Airbnb, that specialise in short term holiday lets.
In a 2016 tribunal case (Nemcova vs Fairfield), it was ruled that these short term lets are a breach of lease as the sub-tenants wouldn’t consider a holiday home to be their “private residence” and therefore the leaseholder was technically running a business from the premises.
5. But, other than holiday makers, I can sublet to who I like, right?
Sadly wrong again. Many leases have certain terms and conditions over who you can sublet to.
In some older leases, this is a throwback to a very different time when boarding houses wouldn’t accept certain groups. However these days it is far more common for the lease clause to exclude subletting to social housing providers such as councils or housing associations.
There is also often a requirement to let your home to a “single household”. Therefore you are unable to let each room or bedroom on individual tenancies or sub-let it to an organisation who would use it to accommodate individuals in a hostel style arrangement.
6. How many tenants?
Finally you need to consider the size of your home. This will place a limit on the number of people you can let it to.
Some London boroughs run a landlord registration scheme where they will assess your home and grant a licence to let to a certain size of family. For example if your home has 2 double bedrooms, you will be able to let it to a family of 4. However if the second bedroom is smaller, you may only be able to offer accommodation to a family of 3.
Some box rooms fail to meet the minimum legal requirement to be classed as a bedroom. So while you may have bought a 3-bedroom property you may not be able to let is as one. The rules around buying property are very different to those around letting it out.
Even if your borough doesn’t run a landlord registration scheme, as a landlord you have a legal obligation to ensure the property isn’t overcrowded. Tenants do not have the same lifestyle “choices” as home owners do. They cannot choose to rent a smaller property than the size of their family demands.
7. But think of the money!
When you sublet you home, you obviously want to cover your outgoings. However in the current market you may find the rent you are able to charge exceeds your expenses. This is classified as income and you may need to pay tax on it. It is always wise to take professional advice on this.
Summary
So if you are thinking of subletting your flat:
- Check your lease to make sure you are allowed
- Consider the type of tenant and tenancy carefully
- Check if your borough requires landlord registration
- Get good advice regarding the financial issues
- Remember to let your freeholder or managing agent know (more on this next month!)