Practice Guide 28 – Extension of leases

Updated: November 2011

Update

This edition of the guide replaces the October 2011 edition. Amendments have been made to bring the guide up to date with current practice and to give more detail on the procedure for dealing with incumbrances on the existing leasehold title.

Scope of this guide

At times it is necessary to extend the terms of a lease. Agreements for the extension of leases are, therefore, common.

However, a lease cannot simply be extended by deed. A new lease needs to be granted.

This guide explains how:

• these transactions may be best effected

• to lodge the necessary applications for registration.

It is aimed at conveyancers and you should interpret references to 'you' accordingly. Land Registry staff will also refer to it.

1 Abbreviations and terms used

In this guide:

'conveyancer' means an authorised person within the meaning of s.18, Legal Services Act 2007 who is entitled to provide the conveyancing services referred to in paragraphs 5(1)(a) and (b) of Schedule 2 to that Act, or a person carrying out those activities in the course of their duties as a public officer. It also includes an individual or body who employs or has among their managers such an authorised person who will undertake or supervise those conveyancing activities (r.217A, LRR 2003)

'ED' means an electronic discharge

'e-DS1' means an electronic DS1

'LRR 2003' means the Land Registration Rules 2003 (as amended)

'prescribed clauses lease' means any lease granted on or after 19 June 2006 which is required by r.58A, LRR 2003 to contain the prescribed clauses set out in Schedule 1A, LRR 2003

'SDLT' means stamp duty land tax.

2 Introduction

A lease may be extended by the grant of a new lease to the existing tenant, to either:

• take immediate effect, or

• commence on a future date.

The following guides give more details on registering or determining a lease.

• Practice Guide 25 – Leases – when to register gives more details on when you must, or may, register a lease.

• Practice Guide 26 – Leases – determination gives more details on closing a leasehold title.

Note: As this guide excludes leases granted under the leasehold reform legislation (ie the Leasehold Reform Act 1967 or the Leasehold Reform, Housing and Urban Development Act 1993), for further details on dealing with these see Practice Guide 27 – The leasehold reform legislation.

• Practice Guide 64 – Prescribed clauses leases gives more details on when a lease granted on or after 19 June 2006 must contain the prescribed clauses.

• Practice Guide 68 – Amending deeds that effect dispositions of registered land – 5.4 Leases – incorrect extent or term demised gives more details on when a deed drawn to correct the demise of a registered lease will be treated as a new lease and when such a deed must contain the prescribed clauses.

2.1 Where the new lease takes immediate effect

In this case the tenants are taken, as a matter of law, to have surrendered their original lease ('the old lease') immediately before the new one commences. This rule is based on the doctrine of estoppel. Because the new lease is inconsistent with the old lease the tenants are estopped from denying that the old lease has come to an end.

The rule applies irrespective of the intention of the parties.

The surrender of the old lease must be effected in the register and the new lease registered in its place. See section 3 How to apply the rules and make substantive applications to Land Registry – new lease taking immediate effect.

If the applicants' existing leasehold title is registered, they should apply for closure of that title. See section 3.3 Closing an existing leasehold title.

If the old lease is not registered, but is noted in the landlord's title, they should apply for cancellation of the notice. See section 3.4 Cancellation of notice of unregistered lease on the landlord's title.

There may be occasions where the new lease takes effect subject to the existing lease and the existing leasehold title is not closed. See section 3.6 New lease made subject to old lease.

2.1.1 Use of deeds of variation

It is clear in law that the term of a lease cannot simply be extended by deed. Instead, where a deed attempts either to:

• vary the length of a registered lease by increasing the term, or

• add new land to the extent demised by a registered lease

it is treated in law as effecting a surrender of the existing lease by operation of law and the immediate grant of a new lease of the whole demised premises, including any additional land. If, therefore, such a deed is effected (whether to correct the original lease or subsequently vary its effect) it will need to be treated as operating in this way. As to the procedure, see section 3.2 Use of deeds of variation.

2.2 Where the new lease commences on a future date

The new lease may commence at any time up to 21 years from the date of the grant, see s.149(3), Law of Property Act 1925. Therefore, if the old lease has less than 21 years to run, the new lease may be granted to commence on its expiry, or at some point in the future, prior to its expiry.

If the old lease has more than 21 years to run, it will have to be shortened, by either:

• a separate deed of variation, or

• suitable wording in the new lease, so that it determines just before the commencement of the new lease.

See section 4 How to apply the rules and make substantive applications to Land Registry – new lease commencing on a future date.

3 How to apply the rules and make substantive applications to Land Registry – new lease taking immediate effect

In this case you will need to lodge applications to register the new lease and either:

• close an existing registered leasehold title, or

• cancel the notice of an unregistered lease, noted on the landlord's title.

3.1 Registration of the new lease

You need to lodge the application in either:

• form FR1 with form DL, in duplicate, if the application is for first registration (rr.23 and 24(1)(d), LRR 2003), or

• form AP1 if the lease is out of a registered title (r.13, LRR 2003).

Note: If granted on or after 19 June 2006 a lease out of a registered title must be a prescribed clauses lease. For more information see Practice Guide 64 – Prescribed clauses leases.

You will need to lodge, as appropriate:

• the new lease together with a certified copy

Note: We will retain the original lease, if a certified copy is not lodged with your application (r.203, LRR 2003)

• the appropriate SDLT certificate

Note: If you need advice on which SDLT certificate is appropriate please contact the Stamp Taxes helpline on 0845 603 0135, open Monday to Friday except Bank Holidays, or visit HM Revenue & Customs's website www.hmrc.gov.uk

• the consent of the landlord's mortgagee, if required

Note: Where the consent is not lodged, we will make the following entry in the property register of the new title:

"The title to the lease is, during the subsistence of the charge dated ….. in favour of ….. affecting the landlord's title (and to the extent permitted by law, any charge replacing or varying this charge or any further charge in respect of all or part of the sum secured by this charge), subject to any rights that may have arisen by reason of the absence of chargee's consent, unless the lease is authorised by section 99 of the Law of Property Act 1925."

We will not make this entry if you lodge a copy of the mortgage deed, and confirm that the granting of the lease was permitted by the terms of the mortgage (by referring to the relevant clause in the deed) and that the mortgagee's consent was not required.

A consent is always required where a charge on the landlord's title is protected by a restriction preventing registration of a lease or a disposition.

• the consent of any superior landlord, if the superior lease requires such consent to be obtained

Note: Where the consent of the superior landlord is not lodged we will make the following entry in the property register of the new title:

"The registrar has not seen any consent to the grant of this sub-lease that the superior lease out of which it was granted, may have required."

• any consent required by a restriction or caution affecting the landlord's title

• any charges or deeds of substituted security, see section 3.5 Deeds of substituted security

• an application form RX1 for any restriction being applied for, other than a Form A restriction, see r.92, LRR 2003. However, you may apply for a standard form of restriction at clause LR13 of a prescribed clauses lease

• where the landlord's title is unregistered, an examined abstract or epitome of title of the landlord's title and any superior titles, if absolute leasehold is required

• contract for sale or for the grant of the new lease

Note: You may need to lodge this if the new lease is granted to the buyer on the occasion of a sale of a registered leasehold property, as the old lease will still be registered in the name of the seller. In this case the buyer must lodge evidence that the existing proprietor has agreed to the grant of the lease.

• surrendered lease, which is not registered or noted, together with title to it

Note: Any mortgages, or other incumbrances, affecting the unregistered leasehold estate must be discharged or released. See section 3.5 Deeds of substituted security.

• surrendered lease, if the new lease is drawn by reference to the terms of the surrendered lease.

Note 1: Where the new lease imports terms from the surrendered lease, the imported terms must be at clauses LR8, LR9, LR10 or LR11 of a prescribed clauses lease, or no register entries will be made, even if any imported terms would appear to require such an entry.

Note 2: Where the new lease contains a reference to the surrendered lease, we will add an explanatory note to the short particulars of the new lease in the register. The wording of the note will vary depending on whether the surrendered lease was registered and whether the extension is being effected by a deed of variation.

Note 3: Where the surrendered lease has previously been varied, the register of the new leasehold title will only make reference to such deeds of variation as are specifically referred to in the terms of the new lease.

If the lease is out of a registered title and is granted on or after 19 June 2006, with certain exceptions, the lease must be a prescribed clauses lease (r.58A, LRR 2003). For further information see section 3.2 Use of deeds of variation and Practice Guide 64 – Prescribed clauses leases.

3.1.1 Fees

The fee is payable under the current Land Registration Fee Order.

3.2 Use of deeds of variation

A deed of variation extending the term will always be deemed to be effecting a surrender of the existing lease (by operation of law) followed by the immediate grant of a new lease. A deed that takes effect in this way does not have to be a prescribed clauses lease, even if the lease being varied is itself a prescribed clauses lease. However, this exemption does not apply if the terms of the variation expressly provide for the surrender of the existing lease or the grant of a new one. For further information see Practice Guide 68 – Amending deeds that effect dispositions of registered land.

You need to lodge the application in either:

• form FR1 with form DL, in duplicate, if the application is for first registration (rr.23 and 24(1)(d), LRR 2003), or

• form AP1 if out of a registered title (r.13, LRR 2003).

In addition to the documents listed in section 3.1 Registration of the new lease, you will also need to lodge:

• the new deed of variation together with a certified copy

Note: We will retain the original deed of variation, if a certified copy is not lodged with your application (r.203, LRR 2003)

• the appropriate SDLT certificate.

Note: If you need advice on which SDLT certificate is appropriate please contact the Stamp Taxes helpline on 0845 603 0135, open Monday to Friday except bank holidays, or visit HM Revenue & Customs's website www.hmrc.gov.uk

As the deed will operate as a surrender of the existing lease and the grant of a new one, you must consider any charges against the existing leasehold title. See section 3.5 Deeds of substituted security. See section 3.1.1 Fees regarding fees.

3.3 Closing an existing leasehold title

This must be made in form AP1 (r.13, LRR 2003).

You must consider any incumbrances on the title and, where appropriate, lodge evidence to support their release, withdrawal or cancellation to enable the title to be closed.

In respect of any charge affecting the closing leasehold title, you should lodge either:

• a form DS1

• an ED, or

• an e-DS1.

Alternatively you may lodge a deed of substituted security. See section 3.5 Deeds of substituted security.

In respect of any restriction, you should lodge either:

• a form RX3 for its cancellation, or

• a form RX4 for its withdrawal.

In respect of any home rights notice, you should lodge a form HR4, together with any necessary supporting evidence. For further information see Practice Guide 20 – Applications under the Family Law Act 1996.

In respect of any other notices which would prevent determination of the existing leasehold title, you should lodge either:

• a form UN2 for removal of a unilateral notice

• a form UN4 for cancellation of a unilateral notice, or

• a form CN1 for cancellation of a notice other than a unilateral notice, including equitable and noted charges.

Note 1: Any notice which would not prevent determination will be carried forward to the new leasehold title, unless an application for its removal or cancellation is included.

Note 2: Additional evidence may be required in support of any application to cancel, withdraw or remove a restriction or notice. For further information see Practice Guide 19 – Notices, restrictions and the protection of third party interests in the register.

Where the existing leasehold title contains adverse easements or restrictive covenants that are not repeated in the landlord's title, these may be carried forward to the new leasehold title.

You should also lodge evidence of the applicants' right to apply if they are not the registered proprietors. See section 3.1 Registration of the new lease.

3.3.1 Fees

The fee is payable under the current Land Registration Fee Order.

3.4 Cancellation of notice of unregistered lease on the landlord's title

This must be made in form CN1, (r.87(1), LRR 2003).

You will also need to lodge:

• the surrendered lease

• the applicant's title to it

• land charges searches against the current tenants, together with evidence to account for any entries revealed.

All incumbrances must be withdrawn or released, and any mortgages affecting the unregistered leasehold estate must be discharged. Alternatively, a deed of substituted security may be lodged. See section 3.5 Deeds of substituted security.

3.4.1 Fees

The fee is payable under the current Land Registration Fee Order.

Note: There is no authority to waive the fee for the CN1 application, regardless of the nature of any other applications lodged simultaneously.

3.5 Deeds of substituted security

Before completing the new lease, the tenants should contact the chargees of the old lease to find out their requirements.

The chargees may prefer to either:

• release their existing charge and take a fresh charge over the new leasehold estate, or

• use a deed to substitute the security.

Land Registry would prefer that the charge on the old lease is discharged using either:

• a form DS1

• an ED, or

• an e-DS1

and then a fresh charge executed over the land in the new lease.

However, we will accept a deed that substitutes the new lease as security for the existing charge, ie a deed of substituted security.

If using a deed of substituted security, the charge over the old lease must still be released. You can achieve this by either:

• using a form DS1

• using an ED

• using an e-DS1, or

• including clear words of release in the deed itself.

The deed must also make clear that it:

• charges the new leasehold estate

• reaffirms or imports the provisions of the original charge.

If there is a restriction in the register relating to the original charge or an entry relating to an obligation to make further advances the entries will only be carried forward if fresh applications in form RX1 and/or CH2 is lodged, unless the deed of substituted security is an approved form of charge containing an application for a standard form of restriction and/or a further advances obligation.

3.6 New lease made subject to old lease

If the new lease is made expressly subject to the old lease we accept that surrender of the old lease does not occur.

In such a case the new lease, as a lease of the landlord's reversionary interest, is not inconsistent with the old lease.

We will not close the existing leasehold title.

Although this approach may have advantages, the existence of concurrent leases, with the same proprietor, registered under separate title numbers may be confusing for those subsequently dealing with the title.

If new conveyancers are employed on a sale and the position is not made clear to them, difficulties often result. The position may also be difficult to explain to a purchaser.

When registering such a new lease, we will have regard to the possibility that the proprietors of any charges affecting the old lease have an interest in the new lease. They may have such an interest under either:

• the terms of their charge, or

• general law.

If making an application to register such a new lease, you will need to make a specific declaration in clause LR4 of the new lease, lodge any charges affecting the old lease or list them in panel 10 of form FR1 or panel 10 of form AP1. The declaration should be along the following lines:

“This lease takes effect subject to but with the benefit of the existing lease dated……..”.

Where appropriate, an entry along the following lines will be made in the charges register:

"The land is subject to such rights as may be subsisting in favour of the persons interested in a charge dated (date) made between (parties) of the lease dated (date) referred to in the Schedule of leases hereto".

Note: This procedure only applies to leases that come into effect immediately.

4 How to apply the rules and make substantive applications to Land Registry – new lease commencing on a future date

You need to lodge the application in either:

• form FR1 with form DL, in duplicate, if the application is for first registration (rr.23 and 24(1)(d), LRR 2003), or

• form AP1 if the lease is out of a registered title (r.13, LRR 2003).

Note: If granted on or after 19 June 2006 a lease out of a registered title must be a prescribed clauses lease. For further information see Practice Guide 64 – Prescribed clauses leases.

You will need to lodge, as appropriate:

• the new lease together with a certified copy

Note: We will retain the original lease if a certified copy is not lodged with your application (r.203, LRR 2003).

• the appropriate SDLT certificate

Note: If you need advice on which SDLT certificate is appropriate please contact the Stamp Taxes helpline on 0845 603 0135, open Monday to Friday except Bank Holidays, or visit HM Revenue & Customs's website www.hmrc.gov.uk

• the consent of the landlord's mortgagee, if required

Note: Where the consent is not lodged, we will make the following entry in the property register of the new title:

"The title to the lease is, during the subsistence of the charge dated ….. in favour of ….. affecting the landlord's title (and to the extent permitted by law, any charge replacing or varying this charge or any further charge in respect of all or part of the sum secured by this charge), subject to any rights that may have arisen by reason of the absence of chargee's consent, unless the lease is authorised by section 99 of the Law of Property Act 1925."

We will not make this entry if you lodge a copy of the mortgage deed, and confirm that the granting of the lease was permitted by the terms of the mortgage (by referring to the relevant clause in the deed) and that the mortgagee's consent was not required.

A consent is always required where there is a restriction in favour of the landlord's mortgagee on the landlord's title.

• the consent of any superior landlord, if the superior lease requires such consent to be obtained

Note: Where the consent of the superior landlord is not lodged we will make the following entry in the property register of the new title:

"The registrar has not seen any consent to the grant of this sub-lease that the superior lease out of which it was granted, may have required."

• any consent required by a restriction or caution affecting the landlord's title

• any new charges, charging the new lease as additional security, together with certified copies

• an application form RX1 for any restriction being applied for, other than a form A restriction, see r.92, LRR 2003. However, you may apply for a standard form of restriction at clause LR13 of a prescribed clauses lease

• where the landlord's title is unregistered, an examined abstract or epitome of title of the landlord's title and any superior titles if absolute leasehold title is required

• deed of variation, if the term of the old lease has more than 21 years to run

Note: A deed varying a lease that takes effect as a surrender and regrant of the leasehold estate does not have to be a prescribed clauses lease. This exception applies whether or not the original lease was a prescribed clauses lease.

• the existing lease, if the new lease is drawn by reference to the terms of the existing lease.

If the lease is out of a registered title and is granted on or after 19 June 2006, with certain exceptions, the lease must be a prescribed clauses lease (r.58A, LRR 2003). For further information see Practice Guide 64 – Prescribed clauses leases.

4.1 Fees

The fee is payable under the current Land Registration Fee Order.

5 Enquiries and comments

If you have a particular concern that is not covered by this guide, please contact Customer Support in advance of the transaction – see Contact details. If the transaction is particularly complex, it may be better if you make your enquiry in writing at the Land Registry office that will process your application.

If you have any comments or suggestions about our guides, please send them to:

Central Operations Group
Land Registry
Trafalgar House
1 Bedford Park
Croydon
CR0 2AQ

(DX 8888 Croydon 3)

You can obtain further copies of this and of all our guides free of charge from Customer Support (see Contact details) or you can download them in English and Welsh from our website.

Remember

• Have you enclosed the correct fee(s)?

• Have you used and signed the correct application form(s)?

• Have you lodged the correct SDLT certificate?

• Have you lodged a certified copy of the lease or deed of variation, if you require the original deed to be returned (r.203, LRR 2003)?

• Have you enclosed evidence of discharge of any mortgage (DS1, ED or e-DS1) or indicated on the application form that these are 'to follow'?

• Where the lease is to joint proprietors, have you indicated whether they are beneficial joint tenants or tenants in common?

• Have you supplied the address for service of the new proprietor of the land for entry in the register?

• Have you lodged a form RX1 if applying for any restrictions, other than a Form A restriction?

• Have you ensured all the incumbrances on the surrendered leasehold estate are suitably discharged, withdrawn or cancelled? Have you lodged appropriate documentary evidence with your application to account for this?

• Have you enclosed any consent(s) required by the restriction(s) entered in the proprietorship/charges registers of the landlord's title?

Important: Please check clerical details in all forms and deeds (especially charges and mortgages) and pay particular attention to all dates, property descriptions, title numbers, and full names of parties, especially where they appear in more than one deed.

Please note that Land Registry may be unable to process applications that are incomplete or defective and your application will risk losing its priority if we have to return it to you – for more information see Practice Guide 49 – Return and rejection of applications for registration.