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I am planning on buying a worn down property that has 4 big rooms to fix it up, and then rent out 2 out of 4 rooms - room by room. I would live with my family in the other two (at least for the starters and potentially rent everything out and move out somewhere else in couple of years or so). Today I got copy of existing lease agreement.

Couple of parts are especially worrying an confusing:

PART VIII
Assignment and Sub-letting
a) The tenant shall not assign charge or sublet or part with possession of any part of the Demised Premises as distinct from the whole

b) Upon any sub-letting or assignment of the whole the tenant shall procure that the sub-tenant or assignee enter into a covenant with the landlord and the tenant of the other flat in the terms of part xi hereof to observe and perform the conditions and obligations of the lease including this obligation

  1. Within one month after any assignment sub-letting or other devolution of the Tenant's interest under this Lease the Tenant shall produce to the Landlord the stamped original of the Deed of Covenant above referred to and a certified copy of the document giving effect to the assignment sub-letting or devolution and pay the Landlords registration fee of ten pounds thereon plus VAT (or such other fee as shall at such time be reasonable)

There's also other part

Part V
Tenants Convenant

  1. Not to use or permit or suffer the Demised Premises or any part thereof to be used for any illegal or immoral purpose or for the purpose of any trade or business and not to apply for planning permission for any change of use of the Demised Premises nor to use or occupy the Demised Premises other than as a private residential flat in the occupation of one family.

Does this mean that I am not allowed to sublet, or that I have to pay 10 pounds every time I get new tenant, and inform Landlord about it?

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You are allowed to sublet the whole of the premises but not part of it (VIII a); if you do you must create the agreement mentioned, pay to have it stamped by the government and pay £10 + VAT to the landlord.

You must only use the premises as a domicile for one family; better make sure you rent those rooms to your cousins.

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  • Anecdotally: I recently had a discussion with a BTL mortgage provider which had a similar provision for their mortgages. Initially, they were unable to provide a definition of "family", and admitted that even if they had a definition, it would be not be enforceable, as they weren't going to check. Eventually, they said that they would regard a "family" as a group of tenants who rent via a single tenancy agreement for the whole property, as opposed to each having separate agreements (as may be the case for an HMO).
    – Steve Melnikoff
    Apr 5, 2016 at 16:09

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