Deed of Variation for Ground Rent

Owning a leasehold property can sometimes feel more complicated than it should be. One of the main concerns for many leaseholders is ground rent, a payment that, in some cases, can rise sharply and cause problems with affordability, mortgage approval, and even the sale of the property.

At Moeen & Co. Solicitors, we regularly assist leaseholders who want to resolve unfair ground rent terms. One of the most effective legal solutions available is a Deed of Variation for ground rent. This agreement allows you to change the terms of your lease, making ground rent fairer, more manageable, and less of a barrier to your property's future.

With the introduction of the Leasehold Reform (Ground Rent) Act 2022, understanding your rights has never been more important.

This comprehensive guide for leaseholders explains the deed of variation for ground rent, including why it's needed and the process of obtaining a deed of variation.

Table of Contents

What is a Deed of Variation for Ground Rent?

A deed of variation for ground rent is a legal document that can be used to modify the ground rent and other terms of an existing commercial lease. This is especially useful when circumstances change, such as the need to adjust ground rent or update other lease terms.

When it comes to ground rent, a Deed of Variation can:

• Reduce or fix ground rent at a manageable level
• Cap how often it increases or removes unfair doubling clauses
• Set the rent at a peppercorn (effectively zero) in line with modern leasehold reforms
• Correct outdated or unfair lease terms

It's a flexible tool that can also be used for other updates, such as extending lease terms, updating repair obligations, or fixing errors in the lease.

What is Ground Rent?

Ground rent is a payment made by a leaseholder (the person who owns a leasehold property) to the freeholder (the person or company that owns the land the property sits on).

When you buy a leasehold property in the UK, you own the home but not the land underneath it. Instead, your lease gives you the right to live there for a set period of time – and ground rent is the charge for that right.

Traditionally, ground rent was low and fairly symbolic. But in recent years, some leases included clauses where ground rent doubles every 10 years or increases with inflation, making it increasingly expensive over time.

Reasons for a Deed of Variation for Ground Rent

There are several practical reasons why leaseholders consider varying their lease terms:

1. Escalating Costs

Older leases often include clauses that cause ground rent to double every 10 or 25 years or rise excessively in relation to the Retail Price Index (RPI). Over time, this can render the property prohibitively expensive to manage.

2. Mortgage Lender Requirements

Many banks and building societies refuse to lend on properties with escalating or uncertain ground rent terms. Without a Deed of Variation, you may struggle to remortgage or sell your property.

3. Repossession Risks

If your annual ground rent is more than £250 outside London (or £1,000 within London) and you fall behind on payments, the freeholder has the legal right to repossess the property.

4. Enhancing Property Value

By removing or fixing unfair ground rent terms, you not only make your property easier to mortgage but also boost its market value.

When a Deed of Variation is Needed

A Deed of Variation can be required for a number of reasons in commercial leases. Below are the most common scenarios:

1. Adjusting Ground Rent

One of the primary reasons for using a Deed of Variation is to change the ground rent clause. This could involve reducing the rent to ease the financial burden on the tenant, changing how often rent reviews take place, or removing unreasonable ground rent increases that no longer reflect current market conditions.

2. Reflecting Business Changes

Commercial leases are often long-term, and over time, the original terms may no longer suit the business goals of either party. A Deed of Variation allows landlords and tenants to realign the lease with present-day business needs, whether that's adapting to market trends, restructuring rent, or changing operational requirements.

3. Amending Other Lease Terms

It's not just about ground rent. A Deed of Variation can also:

• Extend the length of the lease.
• Update or change the permitted use of the property.
• Add or remove specific clauses.
• Amend the responsibilities of either the landlord or the tenant.

This flexibility makes it a valuable legal tool for managing and maintaining a fair commercial lease.

4. Correcting Mistakes

Sometimes, errors or omissions are discovered in the original lease document. Rather than drafting an entirely new lease, a Deed of Variation can be used to correct these issues cost-effectively and straightforwardly.

How to Get a Deed of Variation for Ground Rent?

For many leaseholders, escalating ground rent can create financial stress, affect mortgage approvals, and reduce the marketability of their property. A Deed of Variation for ground rent is a practical legal solution that allows you to formally change the terms of your lease without creating a new contract. Here's a step-by-step guide to understanding how this process works.

Step 1: Reach an Agreement with the Freeholder

The first step is always agreement. Both the leaseholder and the freeholder must mutually consent to the proposed changes in the ground rent.

• It's important to approach this stage with clear communication and, if necessary, professional advice.
• Freeholders are not legally obliged to agree, but many are willing to cooperate, particularly where clauses are considered onerous or where recent legislation has put pressure on unfair ground rent practices.

This mutual agreement forms the foundation for all subsequent steps in the process. Without it, a Deed of Variation cannot proceed.

Step 2: Negotiate New Ground Rent Terms

Once both parties agree to review the lease, the next stage is negotiation. This is where the actual terms of the ground rent are discussed and finalised. Common adjustments include:

• Setting a fixed ground rent: Ensuring the rent does not increase unexpectedly.
• Reducing the ground rent to zero (peppercorn rent): A common solution for leaseholders struggling with affordability.
• Capping increases: Limiting how often or how much the rent can rise over time.

Negotiating clear, fair terms helps protect both parties' interests and ensures the variation is workable in the long term.

Step 3: Have a Solicitor Draft the Deed

A Deed of Variation must be legally drafted to be enforceable. At this stage, a specialist leasehold solicitor:

• Prepares a formal document outlining all agreed amendments.
• Ensures the language is precise to avoid future disputes.
• Checks that all legal requirements, including lender consent (if applicable), are satisfied.

Professional drafting is crucial because poorly prepared deeds may be challenged later, potentially causing financial or legal complications.

Step 4: Sign and Register the Deed

The final step is registration. Once the deed is signed, it must be lodged with HM Land Registry so that the changes are formally recorded against the property's title.

Registration serves several purposes:

• It makes the variation official and legally binding.
• It ensures the new lease terms are clear to any third parties, such as lenders, future buyers, or potential tenants.
• It provides legal certainty and prevents disputes about whether the variation has taken effect.

Once registration is complete, the new ground rent terms are fully recognised, giving leaseholders peace of mind and often improving the property's value and mortgage.

Can a Deed of Variation Affect Property Value?

Yes. Reducing or eliminating escalating ground rent makes your property more attractive to buyers and lenders, often increasing marketability and resale value.

However, the upfront legal and negotiation costs can be significant, so it's important to weigh short-term expenses against long-term benefits.

Why Legal Guidance Matters?

Navigating a Deed of Variation can be complex. Without expert guidance, mistakes in negotiation, drafting, or registration could leave the leaseholder exposed to future disputes or financial loss.

At Moeen & Co. Solicitors, we guide both landlords and tenants through every stage, from negotiating terms to drafting, execution, and registration. Our role is to protect your interests, ensure compliance, and provide a smooth and stress-free process.

Our team of commercial lease solicitors in London ensures that:

• Agreements are fair and legally sound.
• The Deed of Variation is drafted to meet all statutory requirements.
• Registration is completed correctly, protecting your interests.

Expert Help with Deed of Variation for Ground Rent

Need expert help with a Deed of Variation for ground rent? Contact Moeen & Co. Solicitors at 0203 959 7755 for clear advice, legal drafting, and full support throughout the process.