A mortgagee of leasehold by way of sublease is not liable to the lessor for the payment of the rent or for the performance of the covenants in the lease, there being no privity of estate between the mortgagee and the lessor (o). On this account a mortgage by way of sublease is preferable to a mortgage by way of assignment of the reversion (p) in a case where the rent is relatively large or the covenants are such that the mortgagee is not willing to become liable upon them.

On the other hand, in order that an instrument may operate as a sublease, a reversion must be retained by the lessee (q), and the mortgagee is exposed to the danger that the lease may be forfeited by the non-performance by the lessee of the covenants or conditions contained in the lease.