Let’s imagine that the situation arrives arises in the future that you need to get out of the premises. You will go to a firm of estate agents who deal with commercial property and ask them to put your premises on the market for you. Now you run into a slight problem. They tell you that the rent you are paying is much more than the rent people are generally paying in the area for premises of this sort. No one is going to take over premises which are much more expensive than the new ones available in the market.
Your option then will be to underlet the premises. If you underlet the premises, then you create your own new lease as landlord and you can set your own terms – including setting the rent at the appropriate current level. Or so you think.
But then, on reading a lease, you discover that among the many conditions the landlord is entitled to impose before consenting to any underlease, there is one saying that any underlease must be at the same rent as applies to your existing lease. In other words, if you want to underlet, you have to let the premises at a rent higher than current market rent. Obviously, that’s pretty much impossible.
This restriction isn’t even really necessary. What the landlord is attempting to ensure is that if you go bust, so that your lease disappears, they will at least have an undertenant who would then become their direct tenant, paying the same rent. But in the real world, if you go bust, they would have to re-let the premises in the open market and they would then only be able to obtain the current open market rent from a new tenant.
Therefore, really it’s reasonable that your lease should require you only to under let at whatever is the current market rent, rather than restrict you to trying to obtain an unrealistic rent from the past.
You will have noticed from the above explanation that if you underlet at a current rent which is lower than the rent in your lease, you will obviously have to continue paying the difference to the landlord. You may think that, once the next rent review arrives, then the rent under the two leases should be the same. But remember that your lease probably provides for an “upwards only” rent review. So if market rents have not gone up sufficiently by the next rent review, the rent from your underlease will still be less than the higher rent you have to continue to pay.