Deed of Variation For A Lease

A commercial lease deed of variation enables a landlord and tenant to change the terms of a business lease. It is a legal document that specifies the changes that have been agreed, such as adding in a new permitted usage or removing a signage restriction.

The deed supplements the existing lease and the two documents must be read together to understand all the conditions of the commercial tenancy. Often, your solicitor will annotate the original lease to show that it has been varied, so that everyone is aware of the changes.

When you vary the lease by deed, you permanently change it. This means it will bind future landlords and tenants of the property.

Situations when a permanent lease variation may be necessary include:

• When the landlord and tenant have agreed to add or delete a clause in the lease
• When the lease does not include sufficient rights, for example, access rights for service deliveries, or the right to place plant and equipment on the outside of the building
• Where the lease plan does not properly identify the premises and the parties want to update it to current Land Registry standards
• To correct a mistake in the lease.

Often, it is possible to achieve your business goals in a simpler manner. For example, a landlord may write a letter allowing the tenant to pay the rent monthly, even though the lease requires quarterly rent payments. The concession is given to the current tenant only, so when the tenant assigns the property the permission will fall away.

If a variation extends the term of the lease, or increases or decreases the extent of the premises, then this is considered to be a “deemed surrender and regrant.” In other words, it is implied that the tenant’s interest is transferred back to the landlord, and an entirely new lease is brought into being.

This has unexpected and far-reaching consequences for both parties:

• Security of tenure exclusions are not carried through to the new lease, so the tenant may gain a legal right to renew the business lease at the end of the term even though this was not what the parties intended

• Previous tenants and guarantors will be released from their liabilities under the original lease

• The regrant almost certainly will trigger a new Stamp Duty Land Tax charge.

As you can see, the law surrounding deeds of variation can be complex. It is critical to take legal advice from a specialist commercial leasing solicitor to avoid any unintended, and potentially disastrous, consequences for your business.

A commercial lease can only be varied if both parties agree to it – that is the starting point. A specialist commercial leasing solicitor can help you negotiate the changes you are seeking, and then put the agreed changes into a binding legal document.

They can also advise whether a formal deed of variation is the best route forward, or whether you can achieve the same goal through a simple letter or licence.

At Osbornes, we have more than 40 years’ experience working on a range of issues related to commercial lease variations. We can put the property protections in place for your business, and typically can have the deed of variation in place in just a few weeks.

Book a free initial chat with one of our commercial leasing solicitors to find out how we can help today.