A deed of variation may be prepared to correct one specific problem with a lease. But the document can have wider effects if it also changes other terms.
That was the issue in a reported leasehold purchase where a deed intended to correct a plan also altered the ground rent provisions. The buyer was later faced with a much higher rent and a serious question: had the effect of the change been properly explained before the purchase?
If you are now facing a sale or remortgage problem because of an escalating ground rent, see our guide to onerous ground rent and problems selling or remortgaging. It explains what information may help you understand how the issue arose and what you were told when you bought.
A change to the plan also changed the ground rent
In the reported case, the buyer acquired a flat with a lease that originally provided for ground rent of £250 a year, doubling every 15 years. Before the purchase, the seller had agreed a deed of variation with the freeholder to correct an error in the lease plan.
But the deed did more than correct the plan. It increased the starting ground rent to £300 a year and changed the review pattern so that the rent would double every 10 years. The wording also meant the review periods were calculated from the start of the original lease, rather than from the date the deed of variation was made.
The deed included a further provision linked to the property’s “rentable value”. The freeholder later relied on that wording to demand a substantially higher annual rent. The case study reported that the rent was claimed to be £6,759 a year, with further increases potentially following under the lease’s review provisions.
Why the original report mattered
The buyer’s report on title reportedly described the rent as £250 a year, doubling every 15 years. It did not explain that the deed of variation had changed those terms or set out the effect of the additional rent review provision.
That difference mattered. A buyer needs to understand the terms of the lease they will actually acquire, including changes made by any deed of variation. A deed’s stated purpose may be narrow, but the full document should be checked to see whether it also alters rent, lease length, rights, obligations or other parts of the bargain.
The case study said that resolving the ground rent problem involved a substantial payment to change the lease, as well as the costs of pursuing a claim. The precise outcome in any other case will depend on its documents, facts and legal advice.
What to check in a deed of variation
If a deed of variation was completed before you bought, it may be useful to compare it with the original lease and the advice you received at the time. Relevant documents may include:
- the original lease and any later deeds of variation;
- the report on title and any separate advice about the lease changes;
- the contract papers and replies to enquiries;
- ground rent demands, receipts and correspondence with the landlord or managing agent; and
- the mortgage offer and the lender’s requirements that applied to your purchase.
Pay particular attention to how the rent is calculated, when reviews take effect, and whether a review period runs from the date of the variation or from an earlier date. A formula referring to a property’s value or potential rental value may also need careful explanation.
Ground rent requirements have changed over time
Mortgage lenders’ requirements have not always been the same. In a 2017 About Conveyancing post on lenders changing their ground-rent requirements, we recorded how some lenders were beginning to address escalating or open-ended rent provisions in their instructions to conveyancers.
That post is a historical snapshot, not a guide to current lender policy. If a ground rent issue is now affecting your sale or remortgage, the relevant questions include what your own lender required at the time you bought, what the conveyancer reported to the lender, and what you were told about the lease.
Could the problem have been identified when you bought?
A difficult ground rent clause may only become a practical problem years later, when you try to sell or remortgage. That does not, by itself, establish whether the advice given at purchase was adequate. The answer depends on the lease and variation, the circumstances of the transaction, the lender’s instructions at the time, and the advice actually provided.
If you are trying to understand a ground rent problem discovered after purchase, read more about onerous ground rent, selling and remortgaging on When I Bought. You can also gather the purchase documents and ask an appropriately qualified adviser to review what happened. Time limits may apply, so consider getting advice promptly.