Position of subtenant when mesne tenancy ends

As long as the mesne tenant (the subtenant's landlord) continues to hold a tenancy, the subtenant can be advised in the same way as any other tenant. Once the mesne tenancy ends, the position of the subtenant is more complex.

The common law rule is that when the mesne tenancy ends, the subtenancy also ends. This applies whether the mesne tenancy ends when a fixed term ends (also known as 'by effluxion of time') or by service of a valid notice to quit, or the operation of a break clause, by either the landlord or the mesne tenant.[1]

However, there are exceptions where the subtenant may become the tenant of the head landlord when the mesne tenancy ends.

The right of the subtenant to remain in occupation and how easily they can be evicted after the mesne tenancy ends often depends on the whether the sublet is lawful or unlawful.

A tenant who has been given permission to sublet, subject to any conditions, has created a lawful subtenancy.

If the tenant did not have permission to sublet, it is an unlawful subtenancy.

Even if a subletting is unlawful, it can subsequently be 'legalised' if the head landlord waives, or agrees not to act on, the breach of the tenancy agreement. This could be done by continuing to accept rent from the mesne tenant despite being aware of the unlawful subletting.[2]

When the mesne tenancy ends and none of the exceptions below apply, the head landlord can evict the subtenant.

Lawful subtenancy

The Protection from Eviction Act 1977 only applies to occupiers in lawful occupation when the tenancy ended.[3]

If the subtenancy was lawful, the head landlord must obtain a court order to evict the subtenant (but does not have to prove any grounds for possession) where the mesne tenancy was secure or basic protected. This is because the requirement for a court order in the Protection from Eviction Act only applies to tenancies that do not have 'statutory protection', as defined in the Act.[4] The Act does not include secure or basic protection tenancies in the list of tenancies with statutory protection.

The head landlord does not have to serve a separate notice on any subtenant.

The lawful subtenants of statutorily protected mesne tenants, are generally not entitled to a court order. Statutorily protected tenants include assured, assured shorthold and regulated tenants. 

A lawful subtenant can argue the head landlord must apply for a court order where the mesne tenant lost statutory protection, and gave notice to quit to the head landlord after losing statutory protection.

Unlawful subtenancy

If the subtenancy was unlawful, the subtenant is a trespasser not covered by the Protection from Eviction Act 1977. The head landlord does not need to obtain a court order to evict the subtenant.

The following four situations are exceptions to the general rule that the subtenancy ends when the mesne tenancy ends.

Surrender agreed by the mesne tenant and head landlord

If there is a surrender of the tenancy agreed by the head landlord and mesne tenant, then the subtenancy continues and be binding on the head landlord.[5] The tenancy continues on the same terms as the subtenant's existing agreement, and it appears not to matter whether the subletting is lawful or unlawful.[6]

The subtenant only has a change of status if one of the conditions for the type of tenancy is no longer fulfilled. This could happen if the new landlord is no longer resident or if the new landlord is a public sector landlord and the old landlord was private sector.

Forfeiture

Forfeiture is rarely used and is a landlord's only method of ending a contractual tenancy before it has expired without the tenant's consent, unless there is a break clause in the agreement

Forfeiture can only be used if there is a term in the tenancy agreement that allows the landlord to forfeit the tenancy for a particular reason.

Reasons for forfeiture could include:

• 'breach of covenant' (not complying with a term of the tenancy)

• failure to pay the ground rent

• failure to pay service charges 

Where the landlord acts in such a way to unequivocally affirm the lease (such as demanding or accepting payment of rent) then they waive their right to forfeit the lease.[7] Forfeiture proceedings in short-term residential tenancies are now uncommon, as they do not apply to assured tenancies. However, forfeiture proceedings may be encountered where the mesne tenant is a regulated tenant, long leaseholder or business tenant.

Tenants who are faced with forfeiture proceedings can apply to the court for 'relief' (this is a way of getting the forfeiture reversed). If a head landlord takes forfeiture proceedings against a mesne tenant, not only can the mesne tenant apply for relief (if this application is successful, the mesne tenancy and subtenancy continues as before), but the subtenant can also apply.[8]

The subtenant must apply for relief before the forfeiture proceedings against the mesne tenant are completed, unless the forfeiture is for rent arrears, in which case the subtenant may apply even after proceedings are completed.[9]

Relief is unlikely to be granted where the tenants have exercised wilful bad behaviour with regards to the tenancy, acted without regard to the landlord's rights, or are unamenable to any court orders or enforcement processes.[10]

If the subtenant is successful in applying for relief, they obtain a new tenancy, held directly from the head landlord, although it cannot be longer than the original tenancy. Other conditions can be imposed at the court's discretion. The court may ask the subtenant to pay off any rent arrears owed by the mesne tenant or to pay the head landlord's costs. It is likely that the terms of the new tenancy will be similar to those of the mesne tenant's previous tenancy, and not on the same terms as the subtenant's previous tenancy. 

The right to apply for relief applies even when the subtenancy is granted unlawfully.

Protection for regulated subtenants – section 137 of the Rent Act 1977

Although the common law rule is that subtenancies end when the mesne tenancy ends, there is an important exception to this in section 137 of the Rent Act 1977. If both the mesne tenant and the subtenant are regulated tenants under the Rent Act 1977, and the mesne tenancy ends, then any lawful subtenant becomes the tenant of the head landlord.[11] The tenancy that the subtenant then holds from the head landlord is on the same terms as that which they held from the mesne tenant.[12]

The subletting must be lawful for this to be effective, and the whole of the property must have been sublet. Section 137 does not apply if the mesne tenancy is a protected shorthold tenancy.[13]

If the subtenancy is a regulated tenancy of part of the premises, but the mesne tenancy is not a regulated tenancy, the subtenancy remains with protection under section 137(3) of the Rent Act 1977 against the head landlord if the mesne tenancy comes to an end. Case law has established that this rule also applies where the mesne tenancy is not a residential tenancy but a business tenancy.[14]

Protection for assured/AST subtenants – section 18 of the Housing Act 1988

Section 18 of the Housing Act 1988 gives assured/assured shorthold subtenants similar protection to that given to regulated tenants.

If the mesne tenant loses or gives up the tenancy, the subtenant becomes the tenant of the head landlord, so long as the subletting was lawful and the subtenant is an assured/assured shorthold tenant. The mesne tenant does not need to be an assured/assured shorthold tenant.

If the mesne tenancy is a business tenancy, the assured/assured shorthold subtenant can still become the tenant of the head landlord. The subtenant then holds an assured/assured shorthold tenancy from the head landlord (unless the tenancy falls into one of the categories of tenancy that cannot be assured under the Housing Act 1988, for example, because the head landlord is the crown or a local authority).[15]

The head landlord cannot serve notice to end the assured/assured shorthold subtenancy until the mesne tenancy has ended.[16]

It is not uncommon for the mesne tenant in the private rented sector to be a company. If the company is dissolved, the superior tenancy does not end but vests in the Crown.[17]