Renting Homes: The Final Report - Law Commission

6.16 A sub-occupation contract will be effective as between the contract-holder and
the sub-occupier, even if it was entered into without the landlord’s consent (where
the landlord’s consent was required). Where a sub-occupation contract is entered
into without the landlord’s consent, where consent was required, the contract
holder is in breach of the contract. 21 The landlord could make a possession claim
on this ground. 22 A sub-occupation contract entered into otherwise than in
accordance with the head contract (for instance without the landlord’s consent,
where this was required under the terms of the head contract) does not bind the
head landlord. 23
6.17 Where a tenant grants a sub-tenancy, the basic principle at common law is that
they cannot grant a greater interest than they have. 24 This means that they
cannot grant a sub-tenancy for longer than the head tenancy. At common law, if a
tenant under a fixed term tenancy purports to grant a sub-tenancy that is equal to
or longer than the length of their tenancy, the grant of the sub-tenancy is treated
as an assignment of the tenancy to the sub-tenant. For the purpose of our
scheme, we think that contract-holders should decide whether a dealing is to be a
transfer (under which the transferee is normally expected to pay the rent to the
landlord directly) or a sub-occupation contract (where rent under the suboccupation
contract is normally be paid to the contract-holder, who remains liable
to pay the rent under their own occupation contract to the (head) landlord).
Where the contract-holder under an occupation contract (the head contract)
enters into a sub-occupation contract, and the term of the sub-occupation
contract ends at the same time as the term of the head contract, the suboccupation
contract takes effect as such and not as a transfer to the sub-holder. 25
6.18 Under our scheme, it will also be possible for a contract-holder to grant a suboccupation
contract giving greater security than the contract-holder has, where
the landlord consents to this. This will only be possible if the contract-holder and
landlord had modified or varied the relevant supplementary term in the model
contract to permit this. Assuming that the supplementary term had been
modified: 26
(1) a contract-holder under a standard periodic contract could grant a secure
sub-occupation contract, or a fixed term standard sub-occupation
contract; or
(2) a contract-holder under a fixed term standard contract could grant a suboccupation
contract for a fixed term longer than the unexpired period of
the head contract.
21 Cl 120(3).
22 Cl 183.
23 Cl 120(3).
24 This principle was modified to some degree by the decision of the House of Lords in
Bruton v London and Quadrant [2000] 1 AC 406, in which a mere licensee was held to
have granted a sub-tenancy (although not an estate in land).
25 Cl 123.
26 As compared with term 78 in the draft standard periodic contract, and term 75 in the draft
secure contract in Appendix B to this Report.
102