Having a well drafted lease with the right provisions is absolutely crucial to both freeholders and leaseholders. And while it’s really important to get the lease right from the outset, there are reasons why, from time to time, it can be in your interests to review and possibly vary an existing residential lease. And if, for any of the reasons set out below, you do need to think about amending or updating your current lease, it is a good idea to instruct an solicitor who specialises in leasehold property or lease extensions to check that your lease in question is properly serving your best interests.
One of the most common uses for a deed of variation is to enable leaseholders to extend their lease informally – without having to use the statutory, or formal, lease extension process.
Statutory lease extension requires the leaseholder to serve the landlord with a formal notice [under the Leasehold Reform Housing and Urban Development Act 1993] which then enables the landlord to grant an extension to the lease term of a further 90 years.
By contrast, using the informal Deed of Variation route allows the leaseholder and freeholder to agree upon extension of any residential lease by consent, rather than by following the statutory process. The length and possibly other terms of the lease will therefore be varied through agreement between.
Deed of variation for your lease extension
There are three main ways of extending your lease – the formal or statutory route requiring a section 42 notice and 2 alternative ways of an informal variation – using either a deed of variation or an entirely new lease.
The vast majority of informal, voluntary lease extensions are concluded using a deed of variation – rather than a new lease. Why?
There are three main reasons to prefer a deed of variation;
- it’s quicker than drafting and ink negotiating an entirely new lease
- it’s cheaper – your solicitor, and your freeholder’s solicitor will spend much less time (and much less of your money) with a deed of variation rather than drafting and negotiating an entirely new lease
- it’s less risky. Drafting an entirely new lease might result in a number of unforeseen changes from your arrangements under your current lease.
Apart from extending my lease, why vary a lease at all?
There can be some really good reasons to appoint a specialist solicitor to review your lease to see whether or not it is fit for purpose.
In a surprising number of cases this assessment will reveal significant problems with existing leases which need to be dealt with, such as:
• Outdated terms which are no longer relevant given the property’s current state
• Provisions which are incompatible with more recent legislation
• The absence of provisions relating to periodic increases in ground rent arrears, or maintenance of the property for example
• Inadequate provisions related to claiming back the cost of certain maintenance work or services to accommodation
• Incorrect calculation of charges
In addition, as indicated above, it may also be the case the leaseholder wishes to exercise their statutory right to extend a lease by up to 90 years and the lease will therefore need to be varied. It’s quite common for other terms of the lease to be updated when the lease extension is carried out – but again this is usually best carried out by deed of variation rather than a new lease.
Having agreed upon all variations to the lease, the freeholder and leaseholder simply need to finalise the changes. Although the situation may be different when it does not involve a lease extension, when you are extending your lease then it is normal for the freeholder’s lawyer to draft the deed of variation and for the leaseholder to pay the legal fees of both sides because they started the process.
In general, lease variations which don’t involve lease extension are more common with older flats and leasehold houses – simply because of the huge changes in law, regulation and practice since the property was originally built and the original leases were drafted
Varying a Lease Using a Deed of Variation? Instruct an expert solicitor
You are not required by law to have a solicitor help you with lease variation. However, it is a very complex procedure and to protect your interests it is recommended that you instruct one.
And make sure, when doing so, that you appoint a specialist in either leases or lease extension
If mutual agreement for variation cannot be obtained
Where an agreement between the freeholder and leaseholder simply can’t be reached, the case may need to go to a First-Tier Property Tribunal (previously known as the Leasehold Valuation Tribunal or LVT) under the terms of the Landlord and Tenant Act 1987; at this point, it is crucial to have a solicitor on board.
A specialist solicitor will understand how the Tribunal will look upon the application, how likely it is to grant compensation and who will be made to pay.
Applications to the Tribunal are definitely a last resort and should only be made under certain limited circumstances – for example:
• If the provisions for maintenance, services, calculating charges or recovering money paid by tenants are inadequate.
• If two or more leases will only be effective if the variations are identical
• If a counter application is made for similar variations on other flats owned by the freeholder in question
• If inadequate insurance provisions are made in the lease with regards to other nearby flats
Fortunately tribunal applications are relatively unusual – not least because of the legal costs involved. In the vast majority of cases, freeholders and leaseholders eventually reach some sort of agreement that they can both live with.
Considering a Deed of Variation to Extend Your Lease? Call Our Specialists Today
Lease variation can have a huge impact on your life whether you’re a leaseholder or a freeholder. If you’re a leaseholder, your home is at stake if something goes wrong and as a freeholder, a major source of income is at risk.
Our team have the experience to help you help with any type of lease variation, whether for leaseholder or freeholder, and whether for a lease extension, or for any other reason..
- Call us now on FREEPHONE 0800 1404544 for FREE initial phone advice from our experts, or
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Comments or questions are welcome.