Subleases & Licences

A sublease is when an existing tenant rents out all or part of their leased premises to a third party while keeping the head lease in place. A licence is permission to use a space without granting exclusive possession. We draft, negotiate, and advise on both, for landlords, head tenants, and sub-tenants across Australia.

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The choice between a sublease and a licence isn’t a labelling exercise. It changes who has rights against whom, whether the relevant retail leases Act applies, and how the arrangement ends. Our commercial lease lawyers advise on the right structure for each situation.

Sublease vs licence

Sublease

A sublease creates a tenancy. The sub-tenant gets exclusive possession of the subleased area for a fixed term, has a right to quiet enjoyment, and is generally protected by the relevant retail leases Act (such as the Retail Leases Act 2003 in Victoria) if the use qualifies. The head tenant becomes a sub-lessor, sitting in the middle: still liable to the landlord under the head lease and now also liable to the sub-tenant.

Used for: subletting whole or part of premises while keeping the head lease, often when downsizing or when the sub-tenant wants security of tenure. Where the head tenant wants to exit entirely, a lease assignment may be a better option.

See: Sublease Agreements

Licence

A licence is a contractual permission to occupy space without exclusive possession. The licensor keeps control. Licences are typically shorter, more flexible, and can be terminated more easily. They generally don’t attract retail leases Act protections.

Used for: shared offices, coworking, hot desks, market stalls, pop-up retail, short-term occupations, and arrangements where the occupier comes and goes.

See: Licence Agreements

How to tell the difference

The label on the document doesn’t decide it. The substance does. A “licence” that gives someone exclusive possession of a defined area for a fixed term will usually be a sublease in law, with all the consequences that follow. We make sure the document and the substance line up. Getting the structure right at the lease drafting stage avoids mischaracterisation later.

Almost every commercial lease requires landlord consent before the tenant can sublease or grant a licence. Consent must usually be given on reasonable grounds, but the landlord can impose conditions. Acting without consent is a breach of the head lease and grounds for termination.

We:

Apply for landlord consent (and mortgagee consent if needed)
Negotiate the deed of consent
Make sure the conditions are workable for the head tenant
Confirm the position under the head lease and the relevant Act

Mirror clauses

A well-drafted sublease usually includes “mirror clauses” that reflect the head lease, so the sub-tenant inherits the same obligations the head tenant has. This protects the head tenant: if the sub-tenant breaches, the head tenant can pass the consequence through cleanly.

Risks to manage

For head tenants subletting

Remaining liable to the landlord even after the sublease starts
The sub-tenant defaulting and the head tenant being left with the rent
Make good obligations at end of head lease that the sub-tenant won’t fund
Loss of bank guarantee if the sub-tenant trashes the premises
Permitted use mismatch between head lease and sublease

For sub-tenants taking a sublease

The head lease ending early (the sublease ends with it)
Hidden obligations in the head lease that the sub-tenant inherits
Inability to negotiate directly with the landlord
No security if the head tenant defaults

For landlords consenting to a sublease

Loss of pricing leverage if the sub-tenant sets up direct
Sub-tenant’s use breaching the head lease
Confused make good responsibility at end of term
Bank guarantee not covering the increased risk

When a licence is the right tool

Coworking and shared office space
Short-term retail (pop-up, market stall)
Use of meeting rooms, parking bays, signage rights
Use of common areas
Any arrangement where flexibility matters more than security of tenure

A licence is generally easier to draft, faster to put in place, and easier to end. The trade-off is the occupier has fewer rights.

Frequently asked questions

Almost always yes. Read the head lease. Acting without consent is a breach.

Will the relevant retail leases Act apply to my sublease?

It depends on the use of the subleased premises and the state. If the premises qualify as retail, the Act usually applies to the sublease as well as the head lease. We confirm before drafting.

What’s the difference between a sublease and a licence in plain English?

A sublease gives the occupier their own slice of the property with rights against the sub-lessor. A licence gives them permission to use the space but the licensor stays in charge.

Can a coworking arrangement be a lease?

Yes, if the substance gives the occupier exclusive possession of a defined area for a fixed term. We see this often. The label “membership” or “licence” doesn’t change the legal character.

What happens to the sublease if the head lease ends?

Generally the sublease ends with it. There are limited exceptions (some retail leases Acts protect sub-tenants in specific circumstances), but the safe assumption is that a sublease can’t outlast the head lease.

Can the head tenant charge more rent than they pay under the head lease?

Yes, unless the head lease prohibits it. Subletting at a higher rent is common and lawful.

How much does sublease drafting cost?

Fixed fee on most subleases and licences. Send us the head lease and the proposed sublease deal and we’ll come back with a quote within one business day.

Yes. We draft the deed of consent and the conditions we recommend the landlord impose.

Talk to a sublease and licence lawyer

Whether you’re subletting, taking a sublease, or being asked to consent to one, get the document and the consent right from the start.