Who Pays for a Deed of Variation for a Commercial Lease?

Commercial leases are long-term commitments, and sometimes circumstances change. Whether it's a tenant wanting to sublet, assign, or extend the lease, or a landlord seeking to amend certain terms, a deed of variation for a commercial lease is the formal legal document used to make these changes.

A common question arises: who is responsible for the costs associated with a deed of variation?

The general rule is simple: the party that requests the deed of variation usually pays for their own legal costs as well as the legal fees of the other party. However, the exact breakdown can vary depending on the lease agreement and negotiations.

In this blog, we will break down everything you need to know, covering costs, responsibilities, and key considerations for both tenants and landlords.

Table of Contents

What is a Deed of Variation for a Commercial Lease?

A deed of variation is a formal legal document that modifies the terms of an existing commercial lease without the need to draft a completely new contract.

It can be used to:

• Change the lease length or renewal terms
• Adjust rent or service charges
• Allow assignment or subletting of the property
• Make amendments to clauses for compliance or operational reasons

This document ensures that any changes are recognised legally and protects both landlords and tenants.

Who Usually Pays for a Deed of Variation in a Commercial Lease?

The party requesting a deed of variation to amend the terms of a commercial lease, most often the tenant, usually pays for their own and the other party's fees. However, this can be negotiated.

Tenant-Initiated Deeds (Most Common Scenario)

In most cases, tenants request a deed of variation. Common reasons include:

• Subletting the property to another business
• Assigning the lease when selling a business
• Changing terms to make the property more suitable for their operations

When a tenant initiates the deed, they usually pay:

• Their own solicitor's fees for drafting and negotiating the variation
• The landlord's reasonable legal fees for reviewing and approving the changes
• Land Registry fees, if the deed needs to be officially registered

Additional costs may include property valuations if there is a significant rent adjustment or financial change in the lease.

Landlord-Initiated Deeds (Less Common)

Occasionally, a landlord may request changes to a lease, such as:

• Updating clauses to reflect regulatory changes
• Making improvements that benefit the property
• Adjusting terms for operational or commercial reasons

In such cases, the landlord is usually responsible for the costs, particularly if the changes are intended to benefit the tenant rather than the landlord alone.

What Costs are Involved in a Commercial Lease Variation?

When arranging a deed of variation, costs can include your own solicitor's fees, the landlord's legal fees, Land Registry fees, and sometimes additional expenses such as property valuations if there are significant rent adjustments. The total cost often depends on the complexity of the changes and whether the variation involves rent, lease term, or other major amendments.

Understanding the costs helps both parties avoid surprises. Here's a detailed breakdown:

1. Solicitor's Fees

Both the tenant and landlord usually engage legal professionals. Solicitors handle:

• Drafting the deed of variation
• Reviewing existing lease terms
• Negotiating any contentious clauses

2. Landlord's Reasonable Legal Fees

If the tenant initiates the change, they often cover the landlord's solicitor fees, which is standard practice in commercial property transactions.

3. Land Registry Fees

Some deeds of variation must be registered with the Land Registry, especially if they involve significant rent changes or alterations in the leasehold interest.

4. Additional Costs

Depending on the complexity of the variation, additional costs may include:

• Property valuations for rent adjustments
• Surveyor fees for structural or operational changes
• Any professional fees for compliance-related amendments

Key Considerations When Paying for a Deed of Variation

Even though the general rule applies, several factors can affect who pays and how much:

Negotiation Is Possible

The allocation of costs can sometimes be negotiated in the deed. For example, a landlord might agree to cover some fees if the change also benefits their property.

Complexity Affects Costs

The more complex the changes, the higher the legal and professional costs. A simple clause adjustment will cost far less than a complete rent restructuring or lease assignment.

Mutual Agreement Is Essential

A deed of variation is only legally binding if both parties agree to the changes. Clear communication and legal guidance are crucial to avoid disputes.

Can the Costs Be Negotiated Between Tenant and Landlord?

Yes. While it is standard practice for the initiating party to cover most fees, tenants and landlords can agree on different arrangements. For example, a landlord might agree to cover some costs if the variation also benefits them or enhances the property's overall value. Clear communication and professional legal advice can help prevent disputes.

Does the Landlord Ever Pay for a Deed of Variation?

While it's less common, landlords may pay for a commercial lease variation if they initiate the changes, especially when the amendment benefits the tenant or the property itself. For example, if a landlord updates lease terms to comply with new regulations or facilitate improvements, they may bear the costs, including their solicitor fees.

Tips for Tenants and Landlords

• Tenants: Before requesting a deed of variation, get a clear estimate of legal fees and associated costs. Understand what the landlord expects you to cover.
• Landlords: Be clear about your reasonable legal fees and any additional charges. Transparent communication can prevent disputes.
• Both Parties: Engage experienced commercial property solicitors to ensure the deed is drafted correctly and all legal requirements are met.

Why is Legal Advice Important for a Deed of Variation?

A deed of variation is a legally binding document that changes the original lease. Professional advice ensures that all changes are correctly documented, legally enforceable, and that both tenant and landlord understand their obligations and costs. Proper guidance can prevent disputes and ensure the variation is properly registered with the Land Registry if required.

Conclusion

In summary, who pays for a deed of variation for a commercial lease depends largely on who initiates the change. Tenants usually bear the cost when they request a variation, covering their own legal fees and the landlord's reasonable fees. Landlords bear the cost if they initiate the change, particularly when the variation benefits the tenant.

By understanding the costs, negotiating fairly, and seeking professional legal advice, both tenants and landlords can ensure a smooth and legally sound process.

If you need help with drafting or reviewing a deed of variation, call our trusted commercial lease solicitor at 0203 959 7755 or fill in our enquiry form.