Headlease
A headlease is the main long lease granted by the freehold owner, or other superior landlord to a first-tier leaseholder. That leaseholder can then sublet the property on further leasehold interests or private tenancies to residential tenants, often becoming a mesne landlord with the occupiers treated as undertenants within the Private Rented Sector (PRS).
From a landlord’s perspective, the headlease is the document that sets the “rules of the game”. It will usually specify:
Length of term, ground rent, often now a peppercorn rent on new leases and service charges.
Repair obligations and who pays for major capital improvements.
Use restrictions, for example, holiday lets, HMO licence limits, pets, noise, alterations and subletting.
If you own a headlease and let on an assured tenancy or regulated tenancy, you must comply both with the headlease and the wider Renters’ Rights Act regime, including tenancy conditions, rental standards, fit for human habitation, Awaab’s Law, energy efficiency rules such as Minimum Energy Efficiency Standards (MEES) and Higher rate efficiency standards (HRAD), and the frameworks on permitted payments, tenancy deposits, the Private Rented Sector Ombudsman and PRS Database.
Breaching headlease covenants can lead to enforcement or, in extreme cases, forfeiture, putting your entire PRS business at risk in that building.
Also see our landlord blog articles.
