Changes to Legislation in Respect of Short Term Leases
Land Registration Act
From October 2004, any lease of a term of more than seven years will be subject to compulsory registration at the Land Registry. This will involve the Tenant's Solicitors submitting an application to the Land Registry and a title number being given to the new Lease created. Any existing Leases with seven years or more left to run are also subject to compulsory registration upon any assignment. Any Leases that have been completed but are yet to commence whose term is to commence in excess of 6 months from completion are also subject to registration regardless of how long the term of the Lease is for. Theoretically this even affects Student Tenancy Agreements.
Registration provides protection to the Landlord and the Tenant, a lease not registered at the Land Registry may be open to an attack on its validity.
As a Landlord how do these changes effect me?
Any new leases registered at the Land Registry will become part of the public record and details of the Lease will be clearly set out on the title documentation. In a shopping centre or a parade of shops, for example, the rent for a particular unit would be in the public domain. This could potentially have an adverse effect on Lease negotiations on neighbouring units. You should make your solicitor aware if there is any confidential information that you wish to be omitted from the register and an application can be made to the Land Registry to exclude the information, the Land Registry may block out this information if it adjudges this to be appropriate.
Stamp Duty Land Tax Regulations
Leases of seven years or more in term now require a stamp duty land tax return to be completed and submitted to the Inland Revenue for a certificate to be issued. The certificate will be required for Land Registration purposes. Stamp Duty is calculated on any premium paid for the Lease and on the average annual rent for the first five years. Depending on the amount of the premium (if any) and the rent there may be no duty payable. If the Lease provides for a rent increase within the first five years a further Land Tax Return may be required to take into account the increase as this may upwardly affect the duty payable, failure to submit a further Land Tax Return could result in penalties and interest being imposed.
Landlord and Tenant Reform
Recent changes implemented in relation to the Landlord and Tenant Act will affect both the surrender of existing Leases and the creation of new Leases which exclude the Landlord and Tenant Act Provisions relating to security of tenure.
With regard to the creation of new Leases, previously if the Security of Tenure provisions were to be excluded from a Lease one had to make an application to a Judge to obtain an order to confirm this. The new provisions have removed this requirement. Now the Landlord needs to serve on the prospective Tenant a warning which basically states that the Tenant will have no right to renew the Lease once the term expires. |
