When plans go awry - Lease Registration
It can happen, occasionally, that the plans attached to a lease turn out to be incorrect, with the effect that the extent of the property shown on the plans is too small or too large. While in practice this causes few problems, on paper this can have nasty side effects, especially where your lease has been registered with the Land Registry.
Once registered, a lease can only be amended by registration of another document that is approved by the Registry. Say for example that a tenant notices that the plan doesn’t quite reflect the footprint of her office or warehouse. If the lease effectively demises too much land to a tenant, a new plan can be substituted for the incorrect one by way of a deed of variation. So long as this new plan does not add new areas outside the boundaries of the original plan, eg as would happen with a room for room swap, or demise a larger area, then this should cause no problems beyond requiring the registration of new documentation.
If the lease hasn’t demised enough land, however, and the plan needs enlarging, just submitting even a correctly executed deed to the Land Registry would effect an implied surrender and re-grant of the original lease. The side effects of this can range from the tenant acquiring rights to remain in the property after the end of the term and request a new lease to triggering a new obligation to pay SDLT on the ‘new’ lease regardless of the fact that the tenant has been occupying the correct area and views the variation as an administrative step. Additional concerns for the landlord can range from inadvertently releasing guarantors to losing the ability to pursue previous tenants for breaches of covenant committed by current tenants. This happens because, legally, a lease, once granted, cannot be extended spatially to add on extra chunks of land without the parties surrendering the original lease and starting again from scratch. This also applies to attempts to extend the term of the lease by varying the originally granted term, with the same side effects.
So if you do need to vary a lease plan to accurately reflect the situation on the ground, make sure it’s done by way of a new lease. SDLT will still be due in some cases, but at least this way the other unwanted side effects can be mitigated.
Posted on 4 December, 2019 by Ortolan