In commercial property, a deed of variation is a way to change the terms of an existing lease without ripping it up and starting again. Maybe you’re adjusting rent, extending a lease, correcting an error… a deed lets both parties record those changes formally so they have legal effect.
Those changes can be commercially significant. And if they’re handled badly, expensive. So it pays to be clear on when a deed of variation is appropriate, the risks to watch for, and how to structure it properly.
In this guide, our commercial property solicitors explain how deeds of variation work, when they’re typically used, and what to double-check before you sign.
Contents:
- What is a leasehold deed of variation?
- Who can vary a lease?
- Reasons for seeking a deed of variation
- Alterations and renovations
- Subletting or change of tenants
- Correcting errors in the original lease
- Do you need a solicitor?
- The process of obtaining a deed of variation
- How the deed must be signed
- Submitting the deed of variation (and consents)
- How much does a deed of variation cost?
- Does a deed of variation need to be registered?
- Risk and compliance issues
- Who typically pays the associated costs?
- Stamp duty implications
- Avoiding disputes and legal complications
- Can a deed of variation be challenged?
- Summary
What is a leasehold deed of variation?
A deed of variation is a legally binding document that modifies the terms of an existing lease between a landlord and tenant. You’re typically adding, removing or tweaking specific clauses. It avoids the time and cost of drafting a whole new lease to document revised terms. Changes made by deed become part of the lease going forward, binding on future landlords or tenants too.
Who can vary a lease?
Either party can propose changes, but you must both agree; neither side can vary the lease unilaterally. The deed must be signed by the landlord and the tenant (and any other relevant parties) for it to take effect. In practice, check your lease and any security documents in case consents from a superior landlord, lender or guarantor are required.
Reasons for seeking a deed of variation
Leases run for years. Your business priorities and the market shift over time. Or issues crop up that make the original terms less workable. A variation keeps the lease commercially relevant and can save you from relocating or triggering a break just to get different terms.
Alterations and renovations
Modern leases often permit internal/non-structural works with consent; structural or external works are frequently prohibited. If the works you need aren’t permitted, you and your landlord can agree on a deed to change the alterations clause. Remember, other parts of the lease may also be affected (for example, the permitted use), so those may also need to be varied.
Subletting or change of tenants
Assignments are commonly allowed (with consent). Subletting is more restricted and usually subject to conditions (e.g. the subtenant’s financial standing and approval of the sublease terms). If your planned subletting conflicts with the lease, a deed of variation may be needed.
Correcting errors in the original lease
Occasionally, you discover a mistake, anything from a typo to a missing clause. A deed can put that right so the document reflects what you both intended. That said, you can always ask yourself whether both parties are willing to remedy the situation rather than vary the lease.
Do you need a solicitor?
Strictly, no. Practically, yes. What looks like a small tweak can have big knock-on effects (tax, registration, even creating a brand-new lease by accident). A specialist commercial property solicitor will help you:
- check if a deed is really necessary (or if a licence/consent or side letter would do)
- spot pitfalls like a deemed surrender and regrant
- check if any mortgagee or superior landlord’s consent is needed for the variation (as well as If the superior lease needs to be varied too)
- consider and ensure that any amendments to the rest of the lease flowing from the variation are made (including those that aren’t immediately apparent)
- make sure the deed is prepared, executed and, where needed, protected or registered properly.
The process of obtaining a deed of variation
- Get advice early. Once you’ve identified the change you want, speak to a commercial property solicitor.
- Test the route. Sometimes a simple licence from the landlord achieves the same outcome (for example, a change of use permitted with consent) without permanently changing the lease. If the concession should be personal or temporary, a side letter might be more appropriate. Your commercial property solicitor will be able to help you decide which is the best route.
- Agree the drafting. If a deed is the right route, your solicitor will pin down exactly what needs adding, deleting or amending. There’ll usually be a short round of negotiation before the deed is finalised.
How the deed must be signed
For a deed to be valid it must state it’s a deed, be properly executed and delivered. Companies can execute under section 44 Companies Act 2006 (two authorised signatories, or a director in the presence of a witness). Individuals must sign in the physical presence of a witness, even where electronic signatures are used.
Submitting the deed of variation (and consents)
Before completion, line up any required consents (superior landlord, lender, guarantor). When submitting for protection/registration you’ll typically include: the executed deed, relevant title information and any updated plans (for example, if the demise changes). Statutory declarations or statements of truth are only needed in specific scenarios. Timelines vary with complexity and the number of third parties involved, start the consent process early.
How much does a deed of variation cost?
There’s usually your own legal costs, the other side’s legal costs (often payable by the party seeking the change, commonly the tenant), and any third-party consent fees. Landlords sometimes charge a premium for agreeing a variation, and sometimes valuations or surveyor fees might apply.
Land Registry fees then depend on what you’re applying for: protecting a deed of variation on the title is usually a fixed Scale 2 fee; if the variation triggers a surrender and regrant and you’re registering a new lease, that’s a Scale 1 application calculated by reference to the premium and/or rent/value, under the current Fee Order.
Does a deed of variation need to be registered?
A deed of variation isn’t itself a registrable disposition. In most cases, you protect it by entering the appropriate notice on the registered title so it’s visible to third parties. But if the variation extends the term or changes the demise, the law treats that as a surrender and regrant, so you’ll be registering a new lease (where registrable) instead. For unregistered or very short leases (under 7 years), endorse a memorandum of variation on the lease and counterpart for auditability.
Risk and compliance issues
The big pitfall is a deemed surrender and regrant. This can happen -often unintentionally - where the variation of the lease is so fundamental that it is considered that the existing lease can’t possibly continue on its old terms. The two situations in which this happens is where the variation (1) extends the term or (2) adds/removes space (including substitutions for old space).. If that occurs, you may need to redo contracting-out formalities, and you’ll be registering a new lease and reassessing SDLT. Former tenants/guarantors may also be released by the surrender. Plan ahead and model the consequences before you sign.
Other risks include:
- proceeding without obtaining any required consents, for example by a superior landlord, resulting in breaching the superior lease
- releasing a guarantor or former tenant from liability under a guarantee without obtaining their consent or making them a party to the deed
Who typically pays the associated costs?
Costs can be shared, but in practice they’re often met by the party asking for the change (commonly the tenant), including the other party’s legal fees and any third-party consent fees. Sometimes, the lease will contain a provision relating to the payment of landlord’s costs for variation. Either way, build this into your budget.
Stamp duty implications
Stamp Duty Land Tax (SDLT) can be payable where the deed involves consideration (e.g. a premium) or increases the rent. Some rent-increasing variations (notably variations in the first five years of the term) are treated as the grant of a further lease for SDLT purposes; and if there’s a surrender and regrant you assess SDLT on the new lease accordingly. The precise outcome depends on the timing and terms, so tax advice alongside legal advice is sensible.
Note: if the variations amounts to a surrender and regrant, then SDLT is assessed again on the new lease.
Avoiding disputes and legal complications
Get specialist advice early, map the commercial objectives, and check who else’s consent you’ll need (superior landlords, lenders, guarantors, insurers). Variations without required third-party consent can lead to all sorts of issues, including:
- breaching a superior lease
- breaching lending conditions
- releasing a guarantor unintentionally
- invalidating insurance
Speak with your solicitor to ensure the variation doesn’t amount to a deemed surrender and regrant, especially as there are legal mechanisms that can help you avoid it but still achieve what you want.
After completion, either enter a notice to protect the deed on the title or, where relevant, register the new lease. Keep immaculate records, if a dispute arises in future, your paper trail will save time and money.
Can a deed of variation be challenged?
As with any deed, challenges tend to focus on execution (missing signatures, incorrect witnessing) or consent (a party didn’t agree or was pressured). Getting execution right, including the witness being physically present and documenting consents, reduces this risk materially.
Summary
Used well, a deed of variation gives you flexibility without starting from scratch. But some changes can trigger big legal and tax knock-ons, particularly surrender and regrant. The safest route? Get expert help, choose the right mechanism (licence, side letter or deed), and make sure the variation is properly signed and protected or registered so it’s binding and visible to future buyers and lenders.
