Varying A Lease
What Is A Leasehold Deed Of Variation?
A deed of variation enables a landlord and tenant to change the terms of a property lease. It is a signed legal document that confirms in writing the changes that they have agreed – such as removing a restrictive covenant. The deed supplements the existing lease.
Why Do I Need A Deed Of Variation?
Residential property leases last for many decades. Often they are set at 99 years when first drawn – and they can be extended. Sometimes the terms of the lease need to be amended to reflect changes in the law, the block or neighbourhood.
A deed of variation can be used to extend your lease. As part of this process, you may be required to serve notice on your freeholder under the Leasehold Reform Housing and Urban Development Act 1993.
Sometimes a deed of variation may be required to satisfy a mortgage lender ahead of the sale of a leasehold flat or house.
Other typical examples could include removing restrictive covenants which can prevent certain activities at leasehold flats, such as running a business (many enterprises can now be run from a laptop with no adverse effect on neighbouring flats).
Who Can Vary A Lease?
Leaseholders (tenants) and freeholders (landlords) can vary a lease.
Usually it is the leaseholder who wants to change something – often because they need to sell the property. Their conveyancing solicitor may have spotted a lease clause that needs to be amended before the property can be sold.
But it is also possible for the freeholder to vary the leases at their block.
Both sides must agree before any change can take place. This prevents one side from forcing unfavourable lease terms on the other.
What Protection Do Leaseholders Have?
It is important to note the difference between a leaseholder and a shareholder in any management company.
You can be both (and often will be both) – but there are crucial legal distinctions which will determine whether or not you can vary a lease.
A residents’ management company (owned by the leaseholders) will need to ensure that it has passed an appropriate resolution to enter any deed of variation. Usually, the shareholders must vote on this before it can be approved.
But this does not mean the leaseholder-owned management company and its shareholders can ride roughshod over the rights of individual leaseholders.
For instance, the company cannot vote to remove a leaseholder’s parking space simply because say 50% or 75% of the shareholders (who are fellow leaseholders) happen to support the motion. In those circumstances, the leaseholder (and usually any mortgage lender) must also agree.
Deed Of Variation Process
A lease cannot be varied unless both parties agree to it. This must always be the starting point.
- The block management (or freehold) company calls an extraordinary general meeting (EGM) to approve a motion for a deed of variation.
- Or the block management (or freehold) company can approve a motion at their annual general meeting (AGM).
- Or the block directors can approve a motion (if the freehold company’s memorandum and articles of association allow this).
- Individual leaseholders (or groups of leaseholders) – or a private landlord (or group of private individuals) – must then decide whether or not to enter a deed of variation.
- What if there isn’t 100 per cent support from leaseholders and landlord? The company can instruct its solicitors to consider applying to the First-tier Tribunal.
- A tribunal application may succeed if:
- there are more than eight leaseholders and 75 per cent support the motion and not more than 10 per cent oppose it
- there are fewer than nine leaseholders and the motion is carried unanimously or all but one agree.
There are other criteria (such as there being no other possible solution – ie, only a deed of variation will solve the issue of concern). Some of these criteria can be complex. Book a free chat to find out more.
What Is The First-tier Tribunal?
The First-tier Tribunal used to be known as the Leasehold Valuation Tribunal. Part of its role includes settling disputes over deeds of variation when leaseholders and freeholders cannot agree terms.
Section 35 of the Landlord and Tenant Act 1987 allows any party to the lease to apply to vary it.
You cannot force change in a lease without agreement from the other party/parties unless you obtain an order from the First-tier Tribunal.
Section 37 of the Act allows a variation to be enacted by the tribunal if most of the parties agree to it and other criteria are met.
Will The Structure At My Block Affect The Lease Variation Process?
Yes. The process, cost and timescale will vary, depending which of the three main types of structure is in place at your block:
- landlord and tenant relationship – the landlord/freeholder is responsible for maintaining the building and grounds, collecting maintenance and ground rent from the leaseholders/tenants
- third party (tripartite) structure – the leaseholders pay rent to the freeholder but maintenance to a third-party company that carries out maintenance and repairs
- head lease structure – there are three tiers of interest…a freeholder, a head leaseholder and the leaseholders.
- Book a free chat to find out more about how each structure affects the process.
Does A Deed Of Variation Need To Be Registered?
Yes – the deed of variation takes effect in law only once registered.
You may need your mortgage lender’s consent as well (depending on any protection or restrictions the lender may have on the title). This usually has an impact on the time and costs involved.
How Long Does A Deed Of Variation Take?
This depends upon how quickly the parties can agree the wording and enter the documents.
Most simple deeds of variation can be completed within a matter of weeks. Very complex cases and some that involve negotiations can take several years but these are rare.
How Much Does It Cost?
Again, this will depend on how quickly the parties can agree the wording and enter the documents. It also depends on the number of flats involved in the variation process.
In most cases the costs are hundreds of pounds per leaseholder. However, some complex schemes have resulted in costs of thousands of pounds per leaseholder.
Get Expert Legal Advice
Book a free initial chat with one of our residential leasehold solicitors to find out more about:
- how to amend your lease
- how much it would cost you and your block
- how long it would take.