Variation of leases: Increasing rent in the first five years: Example 1
Example 1 - Stamp duty lease - variation to increase the rent
A lease runs from 1 September 2003 to 31 August 2023 (20 years) at a rent of £100,000. It is subject to 5 yearly rent reviews, the first of which would be on 1 September 2008. Prior to the first rent review, the landlord and tenant agree to vary the lease, with effect from 1 September 2006, to increase the rent to £300,000.
SDLT is payable on the increase of £200,000 in the rent, using the calculation of the NPV assuming the deemed grant of a new lease at an annual rent of £200,000 for the remaining 17 years of the lease.
Subsequent rent reviews will not trigger any liability to pay any additional SDLT as this remains a stamp duty lease and the abnormal rent increase provisions do not apply to stamp duty leases.
Note: SDLT is only chargeable on this variation because it takes place within the first 5 years of the lease - and is therefore chargeable under FA03/SHC17A/PARA13. If the variation had taken place out with the first 5 years e.g. on 1 October 2008, then no SDLT would be chargeable as the abnormal rent increase provisions in FA03/SCH17A/PARA14 do not apply to a stamp duty regime lease i.e. one whose effective date was before 1/12/03.