In the words of Bowie – “Changes – Turn and Face the Strange”
I have an existing lease with my landlord. I am in the process of agreeing some variations with the landlord. Surely so long as the landlord has confirmed the changes to me in writing either in a letter or even a deed I do not have to do anything else and I do not need to bother consulting a solicitor.
That really depends on what the variations are. Some variations will result in a position where the existing lease is no longer deemed to be continuing in law and constitutes a deemed surrender of the existing lease and the grant of a new one. It’s called a deemed surrender and re-grant; and can occur without you and your landlord realising the consequences.
That is ridiculous. Why does the law have to be complicated and strange.
The new lease is deemed to be regranted on the same terms as the existing lease but with the variations agreed. Not all variations lead to a deemed surrender and re-grant.
So give me some examples of the kinds of variations which do not give rise to a deemed surrender and re-grant?
Increasing or decreasing the rent under the lease
Reducing the size or extent of your leased premises
Reducing the term of your lease
And give me some examples of the kinds of variations which will give rise to a deemed surrender and re-grant and potentially mean that I need to consult a solicitor?
Increasing the size or extent of your leased premises
Increasing or extending the term of your lease
Are there any things I need to consider?
You may potentially have to pay SDLT as if a brand new lease had been or deemed to have been granted. The SDLT Return and any SDLT payment due must be made within 14 days of the effective date of the variation. And if the lease is a registerable lease then the deed of variation giving rise to the deemed surrender and re-grant will need to be registered and Land Registry registration fees will be payable. You have to deal with registration at the Land Registry within 2 months of the date of the variation.
That is a bit of a tight window of time.
Yes it is and if you do not consult a solicitor you may be unaware of these obligations and timeframes; and you could end up in trouble.
So that is the potential downside for me. What about for the landlord?
Well, from the landlord’s perspective the biggest downside could be the Landlord and Tenant Act 1954. If the existing lease is excluded from the Landlord and Tenant Act 1954, the landlord must ensure that before a variation which gives rise to a deemed surrender and re-grant is effected between the parties, the same statutory procedure of excluding a lease from the protection of the Landlord & Tenant Act 1954 is followed and that the tenant signs the necessary declaration or swears the necessary statutory declaration in advance. If this is not done, the new lease which is granted or deemed re-granted will not be excluded from the Landlord and Tenant Act 1954 and the tenant will inadvertently acquire security of tenure.
Any other possible inadvertent consequences of a deemed surrender and re-grant?
Yes, if the variation is a deemed surrender then it will release any former tenants and guarantors from liability when they would otherwise remain bound under the original lease. This would not have been the parties’ intention when they reached agreement on what they perceived to be simple variations
So changes are not always a simple thing. What a strange world we live in.
This update is for general purposes and guidance only and does not constitute legal or professional advice. You should seek legal advice before relying on its content. For advice, get in touch with your usual Greenwoods GRM contact or scroll down to complete our enquiry form.