4th February 2026 | Jonathan Broad | Commercial Property, Lease Variations, Landlord And Tenant

A landlord and tenant sometimes wish to change the terms of an existing lease. This can arise either to correct mutual mistakes or because the needs of the parties have changed since the lease was completed.

Frequently, this can be done by means of a Deed of Variation, a relatively simple document either adding, removing or amending specified clauses in a lease.

There are, however, certain scenarios where care should be taken.  These two main scenarios are if the variation required:

(i)            adds to the lease demise (e.g. if the landlord and tenant decide to add a room within a building to the area being leased); or

(ii)           extends the length of the term of the lease term (e.g. changing a four year lease into a five year lease).

Both of these variations are deemed to be so fundamental to the underlying lease that it can only occur by the fiction of the existing lease being surrendered, and a new lease being granted.  This deemed surrender and regrant happens regardless of the intention of the parties, and can arise inadvertently. 

Such a deemed surrender and regrant can cause several issues for both the landlord and the tenant.

 

For the landlord

If the original lease had been validly contracted out of the security of tenure provisions of the Landlord and Tenant Act 1954, an accidental deemed surrender and regrant would lead to the creation of a new lease for which no such contracting out process had taken place.  The landlord would therefore inadvertently have granted a lease with the benefit of security of tenure contrary to their original intentions.  This would severely limit the landlord’s ability to remove the tenant even at the end of the contractual term.

Leases granted after 1 January 1996 are subject to privity of contract provisions of the Landlord and Tenant Covenants Act 1995.  If the original lease was granted prior to 1996, it is extremely unlikely to include clauses relating to Authorised Guarantee Agreements on assignment.  An unintentional deemed surrender and regrant could therefore jeopardise a landlord’s ability to enforce against former tenants in the event the current tenant becomes insolvent.  Equally, a deemed surrender and regrant will release former tenants and guarantors of the existing lease for liability under the new lease.  Both of these weaken the landlord’s position in the event the existing tenant becomes insolvent.

If the landlord has mortgaged their interest, the terms of the mortgage will usually require lender’s consent for any surrender or grant of a lease.  An accidental deemed surrender and regrant would breach such provisions leaving the landlord open to enforcement by the lender.   

If the landlord holds a leasehold interest, the terms of the superior lease may require superior landlord’s consent to a surrender or grant of a sublease.  An accidental deemed surrender and regrant would breach these requirements, which could make the landlord’s lease liable for forfeiture.

 

For the tenant

The tenant may be liable for SDLT (stamp duty land tax) on the new lease.  Even where reliefs such as overlap relief may apply, it is unlikely the tenant will realise the potential SDLT liability in time on an accidental surrender and regrant, and find themselves subject to penalties for late returns or late payment of SDLT.

If the new lease is for a term of seven years or more it is compulsorily registrable at the Land Registry.  For an accidental surrender and regrant, it is likely the tenant will not realise the requirement for registration.  Failure to effect registration at the Land Registry within two months will lead to the legal estate becoming void and the lease taking effect as an agreement for lease under the Land Registration Act 2002.  This is perhaps less likely to occur as the tenant will usually want to register a Deed of Variation in any case, and the Land Registry would pick up on the issue.  Nonetheless, it can take some sorting at the Land Registry and so is best avoided.

If the tenant has mortgaged their leasehold interest, it is likely an accidental deemed surrender and regrant will breach the tenant’s mortgage.

 

Other variations which created a deemed surrender and regrant

Whilst an addition of land to the demise and an extension to the term are the main circumstances in which a deemed surrender and regrant can take place, other variations can lead to a surrender and regrant.  A variation which did not extend the lease term, but which provided the tenant with an option to extend the term was held to create a deemed surrender and regrant. 

 

Avoiding a deemed surrender and regrant

There are ways to document variations so as to avoid a deemed surrender and regrant: e.g. by granting a reversionary lease to take effect at the end of the existing one, or by granting a supplemental lease of the additional area to be added to the demise.

If you have any questions or would like to learn more, please contact Jonathan Broad, Associate in our Commercial Property team.

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