This Practice Note looks at the position when a tenant grants an underlease for a term that is longer than the tenant’s remaining lease term, including both the legal and commercial consequences, the implications under the Landlord and Tenant Act 1954 (LTA 1954) and the Landlord and Tenant (Covenants) Act 1995 (LT(C)A 1995) and the land registration requirements.

An underlease that is granted for as long, or longer, than the original lease operates as an assignment and not as an underlease. Consequently, an underlease must be granted for a term that is at least one day less than the original lease. It is better to allow at least a three day gap.

If an underlease takes effect as an assignment, then:

1. •

   the tenant divests himself of the entirety of his interest in the premises (whether the disposition takes effect as a transfer of the legal estate or, due to the absence of a deed, in equity only)

2. •

   as the tenant has divested himself of his entire interest, the only person to whom possession can be delivered