Leases: grant of lease out of short lease: sub-lease at higher rent
Mrs V paid a premium of £20,000 to acquire a 30 year lease over a property. Five years later she granted a sub-lease for 10 years over the whole property. The rent payable under the original lease was £8,000 per year; the rent payable under the sub-lease was £10,000 per year.
Mrs V received a premium of £12,000. The Valuation Office Agency stated that the notional full premium would be £15,000.
- If the sub-lease had required the same rental payments as the original lease, Mrs V’s allowable expenditure on the grant of the sub-lease would have been:
|£20,000||x||81,100 - 61.617||=||£4,462|
- Since the rent payable under the sub-lease is greater than that payable under the original lease, Mrs V’s allowable expenditure on the grant of the sub-lease is reduced as follows:
|£4,462||x||£12,000 (the actual premium)||=||£3,570|
|£15,000 (the notional full premium)|