Granting more space to an existing tenant

The following Property practice note provides comprehensive and up to date legal information covering:

  • Granting more space to an existing tenant
  • Why grant an additional lease?
  • Documentation
  • Assignment
  • Underletting
  • Forfeiture
  • Tenant break rights
  • Rent review
  • Rights
  • Statute
  • More...

Granting more space to an existing tenant

Why grant an additional lease?

If a tenant wishes to take additional space in the same building or development, the parties may be tempted to vary the lease to include the additional space. However, a variation that increases the demise always results in surrender and regrant, regardless of the parties’ expressed intentions.

See Practice Note: Lease variations—surrender and re-grant issues.

An unintended surrender and regrant can have the following disadvantages:

  1. it can result in the loss of valuable covenants for the landlord (eg previous tenants and guarantors)

  2. if the original lease was an old lease (granted before 1 January 1996), the regranted lease will be a new lease and the tenant will be automatically and irretrievably released on assignment where the regranted lease does not contain an obligation on the tenant to enter into an authorised guarantee agreement

  3. if the original lease excluded sections 24–28 of the Landlord and Tenant Act 1954, the regranted lease will not be contracted out unless the correct statutory procedure has been followed

  4. the regranted lease may trigger a charge to stamp duty land tax (SDLT) on the whole of the premises, old and new. The rent (and any premium) will count as chargeable consideration. The tenant is not entitled to a refund of the SDLT or stamp duty paid in respect of the original lease.

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