Summary
- A deed of variation lets landlords and tenants formally amend specific lease terms, such as rent, repairs, or permitted use, while keeping the original lease in place.
- Variations that extend the lease term or change the property may be treated as a surrender and regrant, which can carry legal and tax consequences.
- Third-party consents, correct execution, and registration requirements all need careful attention when varying a lease.
- This is a plain-English guide explaining deeds of variation in commercial leases for business owners and tenants in England and Wales.
- LegalVision’s business lawyers specialise in advising clients on commercial lease variations and related property matters.
Tips for Businesses
Before signing a deed of variation, check whether the change might trigger a surrender and regrant, confirm any required third-party consents, and ensure correct execution and registration. Review knock-on effects on other lease clauses and keep clear records of all previous variations to the lease.
On this page
- How Does a Deed of Variation Change a Lease?
- Understanding Differences Between Old Leases and New Leases
- Using a Deed of Variation to Document Changes
- When a Deed of Variation Should Not Be Used
- How Are Deeds of Variation Entered Into?
- Can a Deed of Variation Apply to More Than One Lease?
- Key Risks and Pitfalls to Consider
- Key Takeaways
- Frequently Asked Questions
Commercial leases commonly run for many years. In commercial property, landlords and tenants might therefore need to change certain parts of their lease over time. A deed of variation acts as a formal way to make those changes without ending their current lease and starting all over again from scratch. However, deeds of variation can bring up legal and practical issues. This article explains how deeds of variation work in practice and the key issues businesses should consider when varying a lease in this way.
How Does a Deed of Variation Change a Lease?
A deed of variation is a legal document that a landlord and tenant can use to amend particular clauses of an existing lease. It records the agreed changes and incorporates them into the lease going forward.
The original lease continues in force, but the deed amends it to reflect the agreed changes. Where the deed changes a term, its amended wording replaces the original lease clause. All other terms remain unchanged. This makes a deed of variation extremely useful where the parties want to update parts of the lease without drafting and negotiating a brand new lease.
Understanding Differences Between Old Leases and New Leases
For the purposes of the Landlord and Tenant (Covenants) Act 1995, leases granted before 1 January 1996 are treated as ‘old leases’, while most leases granted on or after that date are ‘new leases’.
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Using a Deed of Variation to Document Changes
In most cases, parties will document changes to a lease in a deed. A deed helps by:
- providing certainty;
- creating a clear written record of what has been agreed; and
- reducing the chance of disputes or evidential difficulties later down the line.
A deed of variation can be used to record a wide range of changes. Common examples include:
- amendments to rent;
- rent review provisions;
- repairing obligations; or
- permitted use.
One major benefit is that the parties can amend only the relevant clauses, leaving the rest of the lease unchanged.
When a Deed of Variation Should Not Be Used
A deed of variation is not suitable in every situation, and problems can arise where the proposed changes go beyond varying existing terms. This is most likely where the variation extends the lease term or changes the property included in the lease. In those circumstances, the law will treat the variation as a ‘surrender’ of the existing lease and grant a new one by operation of law.
A surrender and regrant can have important legal and tax consequences. In some cases, it can also give rise to stamp duty land tax implications depending on the nature of the variation. It is therefore important to understand these risks, and it is sensible to take legal advice before proceeding with a lease variation.
How Are Deeds of Variation Entered Into?
If a deed of variation is appropriate, then a solicitor will usually prepare the deed of variation.
The deed should clearly identify the parties and the property. It should refer to the original lease and any previous variations, set out the precise amendments, and state when the agreed changes will take effect. Getting the deed signed correctly is crucial, as deeds have important witnessing requirements to make them effective.
Can a Deed of Variation Apply to More Than One Lease?
In principle, a single deed of variation can apply to more than one lease. This can be useful where the same parties hold multiple leases, such as within a property portfolio.
Whether to use one deed or several depends on the circumstances, and taking legal advice can help you to determine the most appropriate approach.
Key Risks and Pitfalls to Consider
Lease variations should always be handled carefully. A change to one clause can require changes elsewhere in the lease, and these knock-on effects are not always obvious at the outset.
Consent from third parties may also be required. This could include a superior landlord, a lender or a guarantor. In some cases, those parties must sign the deed. If the parties fail to obtain the required consents, the variation may place a party in breach of legal obligations.
This cheatsheet includes practical tips to understand key clauses and avoid disputes in leasing agreements.
Key Takeaways
A deed of variation can be a highly flexible and cost-effective way to change lease terms but keep the original lease in place. This document allows landlords and tenants to adapt their arrangements as business needs change. However, not all changes are suitable for a deed of variation.
If you need help with a deed of variation, LegalVision provides ongoing legal support for businesses through our fixed-fee legal membership. Our experienced leasing lawyers help businesses manage contracts, employment law, disputes, intellectual property, and more, with unlimited access to specialist lawyers for a fixed monthly fee. To learn more about LegalVision’s legal membership, call 0808 196 8584 or visit our membership page.
Frequently Asked Questions
What is a deed of variation of a lease?
A deed of variation is a legal document that allows a landlord and tenant to change particular clauses of an existing lease. The original lease continues to apply, subject to the changes set out in the deed.
Should I take legal advice before entering into a deed of variation?
Legal advice is sensible, even for a small proposed variation. Minor modifications might still give rise to wider legal or tax consequences. Legal advice can help ensure the variation works as intended and avoids risks.
Can a tenant refuse to sign a deed of variation?
Yes. A tenant can refuse any proposed variation, since both parties must voluntarily agree to the changes before the deed becomes binding.
How long does it take to complete a deed of variation?
Timing varies depending on negotiation complexity and whether third-party consents are needed, but straightforward variations can often be finalised within a few weeks.
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