Deed of Variation

What is a Deed of Variation?

A Deed of Variation enables a Tenant to change the terms of their existing lease. It will need to be drawn up by a solicitor and approved by both the Landlord and the Tenant, signed by both parties and then registered at the Land Registry.  The Deed supplements the existing Lease. (The existing lease outlines the terms and conditions of the property or land and the term itself and is accompanied by a plan referencing the property.)

A Deed of Variation can be used to extend your lease or perhaps you need a Deed of Variation to remove restrictive covenants in your lease or change the terms in the original lease, amend the Landlord or Tenant responsibilities or maybe the existing lease no longer aligns with the needs or preferences of either parties.

Sometimes a Deed of Variation is necessary if you are varying the layout of the property and an update of the original land registry plan is required. It is advisable to obtain a Deed of Variation Plan if you have carried out any physical changes to the property as you will experience problems later on down the line when you come to sell the property. If the lease plan does not accurately identify the premises then a Deed of Variation to vary the lease plan is recommended. Likewise, a Deed of Variation can be used to correct a mistake in the lease.

Pros for a Deed of Variation

• Flexibility of allowing modifications without re-writing the entire lease
• Clarification of terms of the Lease that are unclear or are in dispute
• Opens communication between Landlord and Tenant
• Can often be dealt with fairly quickly
• Can be cost effective

Cons for a Deed of Variation

• Both parties and their solicitors have to agree to the amendment which may mean some to and fro-ing of correspondence between parties
• Mortgage lenders sometimes have certain wording requirements
• It has been established that where there is a variation of a fundamental term of the lease, such is the extent of the demise or length of the term, there is an implied surrender of the original lease and a regrant of a new lease on the varied terms. An obvious implication of this for a landlord is that the Landlord and Tenant (Covenants) Act 1995 will apply to the new lease as a new tenancy with the consequent release of an original tenant from ongoing liability.

When you vary the lease by way of a Deed of Variation, you permanently change it meaning future landlord and tenants will be bound by it too. A deed of variation must be carefully drafted to ensure that it accurately reflects the agreed changes and is legally binding.

Why deed of variations may be necessary if you have a mortgage

When you buy a property with a mortgage, a solicitor is not only acting on behalf of the borrower, but on behalf of your lender too. Therefore, solicitors have to comply with the terms set out in the UK Finance mortgage lenders’ handbook to ensure that a lender is happy to lend against the lease. Older leases may need to be varied to meet the lender requirements.

A Deed of Variation is often invoked when the ground rent becomes overly costly for the leaseholder. The deed ensures that future increases in ground rent are reasonable, which is an important consideration given that lenders are hesitant to lend on leases with expensive ground rents.

A Deed of Variation could significantly reduce the amount of ground rent you need to pay over time. This could make your property more attractive to buyers should you want to sell in the future and mortgage lenders should you wish to refinance.

If you require a Deed of Variation for your lease or some advice on whether you need one, please get in touch.