ABG Property Newsletter – March 2012

Invalid execution of lease

In a recent case the Land Registry decided that a lease had been invalidly executed because the execution pages had been signed without the remainder of the lease being attached.

For a document to be validly executed as a deed by an individual, it must be signed by the individual in the presence of a witness, or at his direction and in his presence and the presence of two witnesses, and it must also be delivered as a deed.

In this case the lease had been purportedly executed by the landlord and by the lessee, but the landlord later claimed that he had not intended to execute a lease and that the rest of the pages of the lease had been added to the execution page after he had signed it. In the meantime the lessee had charged the lease to the bank and the lease and charge had been registered at the Land Registry.

However, the Land Registry subsequently decided that the lease was invalid and the register was rectified by the cancellation of the lease and the charge. It appears that in this case the purported lessee had acted dishonestly in his conduct towards the landlord, but the decision does reinforce the necessity of complying with the strict legal formalities when dealing with land.

Consent to underletting

It is common practice for landlords to charge the tenant a fee for consent to underlet the property, but what if there is no express term in the lease giving the landlord the right to charge the tenant a fee?

The Lands Chamber has recently ruled that a landlord is entitled to make a charge for the costs incurred in consenting to underletting despite the absence of an express term in the lease for such a charge, provided that the amount of the charge is reasonable.

This decision may seem surprising, but it means that a landlord can validly withhold consent to underlet and is not acting unreasonably if the tenant has refused to pay a reasonable charge even where there is no express provision in the lease allowing the landlord to make a charge.

Budget changes to Stamp Duty Land Tax

The Chancellor, George Osborne has introduced some substantial changes to the Stamp Duty Land Tax (“SDLT”) regime in the March budget. Residential properties sold for more than £2m will be subject to a new 7% stamp duty charge.

He has also indicated that stamp duty on residential properties over £2m which were bought via a company would increase to 15% SDLT. This is a move to combat methods of avoiding paying the full amounts of SDLT. There are two popular methods. One was by paying for chattels – fixtures and fittings – separately and, as a result, bringing the cost of the actual property below say, for example, the £125,000 threshold. The second was by setting up a limited liability company to buy the property, which then immediately sold it back to the individual, or which pushed up the price when selling on to the next buyer. This is done by the owner selling shares in the company rather than the property itself and it is this second method which is the one that the chancellor is keen to clamp down on. This new higher level of SDLT is being brought in with immediate effect.

  • 1%: Properties of £125,000 to £250,000, but first-time buyers are exempt until 24 March (£150,000 on commercial properties)
  • 3%: £250,000 to £500,000
  • 4%: More than £500,000
  • 5%: More than £1m, (residential property only)
  • 7%: more than £2m (residential property only)
  • 15%: more that £2m where purchaser is a company (residential property only)

 

The comments in this note are of a general nature only. Full advice should be sought on any specific problems.

Siobhan Goodacre
sgoodacre@abg-law.com
+44 (0)115 934 3325

Wendy Shaw
wshaw@abg-law.com
+44 (0)115 934 3303