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HMRC internal manual

Stamp Duty Land Tax Manual

HM Revenue & Customs
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Introduction: Definitions: Leases

In Scotland a lease is not defined for SDLT purposes.

FA03/SCH17A/PARA19(1) applies the legislation in Finance Act 2003 to leases in Scotland, where the terminology and law are different.

Hence, references in Finance Act 2003 to

* the term of a lease means the period of the lease (although, in practice, the word "term" is often used in Scotland too)
* the reversion on a lease means the interest of the landlord in the property subject to the lease.

Other common Scottish legal terminology dealing with leases includes

* ish (which means the natural expiry, or the date of the natural expiry, of a lease)
* irritancy (which means forfeiture)
* assignation (which means assignment)
* renunciation (which means surrender - although, again, it is not uncommon for the word "surrender" to be used in Scotland too)
* Books of Council and Session (which are a Register of Deeds, but not to be confused with the Land Register or Register of Sasines. The Books of Council and Session are simply a register to preserve deeds to prevent them being lost).
* tacit relocation (which is very roughly equivalent to holding over under English law - where a lease expires without the necessary notice to quit being served, it is deemed to continue for a further period of one year (or a period equal to the original term, if less than a year) on the same terms and conditions as the original lease. This applies successively every time the lease expires until the lease is formally terminated).

While in England & Wales, and in Northern Ireland, a lease is an interest in land, in Scotland a lease is at common law simply a personal contract between a landlord and a tenant for the exclusive use of a given property for a period in return for a rent. Thus, at common law, Scottish leases were similar to licences and were not enforceable by tenants against successors of their landlords if the landlord sold the property. However, for centuries, statute has provided tenants who comply with certain simple procedural formalities (such as taking possession of the property or registering their interest in the Land Register of Scotland) with security of tenure in these circumstances. In practice, tenants almost invariably comply with the procedural requirements for statutory protection. Such tenants are said to have a “real right”, good against the whole world, and not just a personal right good only against the original landlord.

The extension of a lease in Scotland is treated for SDLT purposes as if it were the grant of a new lease for the extended term commencing on the day after the existing lease would have terminated but for the extension.

The treatment of a lease for SDLT purposes differs depending on whether it is a lease for a definite or an indefinite term.

A lease for a definite (or fixed) term is one whose term can be ascertained at the time of grant (either from the wording of the lease itself or from some ancillary document such as an agreement for lease or certificate of practical completion). This includes a lease worded so that it ends on a specific date or one where the term is a specific length of time from the date of grant.

The term of a lease in Scotland is the contractual or express term specified in the lease. Commercial leases in Scotland are restricted to a maximum term of 175 years. Residential leases in Scotland are restricted to a maximum term of 20 years.

It is highly unusual in Scotland for a lease to be granted for an indefinite term, and it is doubtful whether it is even legally competent. It is however possible, and quite common, to have an initial fixed term but subject to a provision that the lease then continues, following the expiry of that initial fixed term, until terminated by either party on giving a stated period of notice.

See SDLTM18705 for the definition of fixed term leases

See SDLTM18710 for the definition of indefinite term leases

See SDLTM17640 for further details on the treatment of agreements for lease and missives.