Commercial Lease Law

Lease Regear UK — Restructuring a Commercial Lease Before Expiry

A lease regear is an agreed restructuring of an existing commercial lease between the same landlord and tenant, before the lease reaches its natural expiry. Typical changes: rent reduction (with/without reverse premium); term extension (in exchange for premium or break clause surrender); removal/addition of break clause; repairing obligation changes (schedule of condition); user/alienation covenant relaxation. Documentation: deed of variation (simpler; preserves existing lease; no LTA 1954 re-contracting-out needed; no SDLT unless new premium/NPV change) vs surrender and re-grant (new lease; must re-contract out of LTA 1954; new SDLT with Sch 17A offset; new L&T(C)A 1995 regime). Surrender and re-grant trap: deed of variation that extends the term or materially changes rent obligations may be treated as a surrender and re-grant even if labelled a variation (Jenifer Mann v Mason [1999]). SDLT: deed of variation generally not a new chargeable transaction; surrender and re-grant — SDLT on new lease NPV; Sch 17A FA 2003 offset reduces new NPV by surrendered lease NPV. Tax: reverse premium paid by landlord = capital expenditure (CT-deductible); premium paid by tenant = capital receipt for landlord (CGT/CT on gains). MEES: regear opportunity to negotiate EPC upgrade works jointly; green lease clauses; landlord-funded upgrades in exchange for tenant commitment. Timing: start discussions 12–24 months before lease break/expiry. Scotland: LBTT on surrender and re-grant; annual returns for variable-rent new leases.

10 min readUpdated 7 June 2026Last reviewed: 17 May 2026lease-regearlease-restructuredeed-of-variationsurrender-and-regrant

What Is a Lease Regear?

A lease regear (lease restructure; lease renegotiation) is a consensual variation of an existing commercial lease between the same landlord and tenant, agreed before the lease's contractual expiry. Common regear terms: rent reduction (with/without reverse premium); term extension (in exchange for premium or break clause surrender); removal/addition of break clause; changes to repairing obligations (schedule of condition); relaxation of user/alienation covenants. Regears differ from LTA 1954 renewals — agreed before the statutory renewal process is triggered; terms entirely a matter of negotiation; no court involvement. Documentation: deed of variation or surrender and re-grant — the choice has significant SDLT, LTA 1954, and L&T(C)A 1995 implications.

Deed of Variation vs Surrender and Re-Grant

Deed of variation (preferred): existing lease continues; LTA 1954 contracted-out status preserved (no re-doing the procedure); no SDLT unless new premium or significant NPV change; simpler documentation. Surrender and re-grant: creates a new lease; must independently re-contract out of LTA 1954 (new warning notice/declaration required); SDLT on new lease NPV with Sch 17A offset for surrendered lease; new L&T(C)A 1995 regime (AGA possible on future assignment). Trap: a deed of variation that extends the term or materially changes rent may be treated as a surrender and re-grant even if labelled a variation (Jenifer Mann v Mason [1999]) — specialist legal advice essential before completing any regear.

SDLT, Tax and MEES

SDLT: deed of variation — generally not a new chargeable transaction; specialist advice needed where variation extends term, increases rent, or involves a new premium. Surrender and re-grant: SDLT on new lease NPV; Sch 17A FA 2003 reduces NPV by surrendered lease NPV; often significantly reduces or eliminates SDLT. Tax: reverse premium paid by landlord = capital expenditure (CT-deductible); premium paid by tenant = capital receipt for landlord. VAT: where property is opted to tax, all rents and premiums are VAT-able; VAT on reverse premium generally outside scope — confirm with specialist. MEES: regear opportunity to negotiate EPC upgrade works jointly; green lease clauses; landlord-funded upgrades in exchange for tenant commitment to new term; landlords facing MEES requirements before 2030 incentivised to regear while tenant is in place.

Frequently asked questions

What is a lease regear in commercial property?+

A lease regear is an agreed restructuring of an existing commercial lease between the same landlord and tenant, before the lease's natural expiry. Typical changes include rent reduction, term extension, removal or addition of break clauses, and changes to repairing obligations. Both parties benefit: the landlord secures income certainty; the tenant secures improved terms.

Should a lease regear be a deed of variation or a surrender and re-grant?+

A deed of variation is generally simpler and preserves the existing lease's contracted-out status under LTA 1954. A surrender and re-grant creates a new lease — it must be independently contracted out, SDLT arises on the new NPV (with Sch 17A offset), and the L&T(C)A 1995 applies afresh. The choice depends on the extent of changes and the SDLT position. Specialist legal and SDLT advice is essential.

Is SDLT payable on a lease regear?+

A deed of variation is generally not a new SDLT transaction unless it creates a new premium, extends the term, or significantly changes the rent. A surrender and re-grant is a new lease for SDLT purposes — SDLT is charged on the NPV of the new lease, subject to the Sch 17A FA 2003 offset for the surrendered lease's NPV. Specialist SDLT advice should be obtained before completing any regear.

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LTA 1954 Part II: Business Tenants Have Statutory Right to Renew Lease — Landlord Opposes on s.30 Grounds (a)-(g) — s.25 Notice (6-12 Months) — Contracting Out (s.38A Warning Notice + Statutory Declaration) — Compensation on No-Fault Grounds (e)(f)(g)

Landlord and Tenant Act 1954 UK 2026 — Business Tenancy Security of Tenure, Contracting Out and s.25 Notices

Landlord and Tenant Act 1954 Part II applies to commercial tenancies (premises occupied for business purposes). Business tenants have statutory security of tenure (right to renew lease at end of contractual term). Landlord can oppose renewal on s.30(1) grounds: (a)-(c) fault grounds; (d)-(g) no-fault grounds. s.25 notice (landlord terminates): 6-12 months; must state whether opposing and on which grounds. Contracting out (s.38A): formal warning notice + tenant statutory declaration before lease granted. Compensation payable only on no-fault grounds (e)(f)(g): 1× rateable value (2× after 14 years). NI: Business Tenancies (NI) Order 1996. Scotland: no statutory equivalent.

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Commercial Lease Renewal UK 2026 — LTA 1954 Security of Tenure, Section 25 Notice, Section 26 Request, Opposing Grounds and New Lease Terms

Commercial lease renewal guide 2026 under the Landlord and Tenant Act 1954 (LTA 1954): business tenancies protected by Part II LTA 1954 do not end at contractual expiry — they continue under s.24 until validly terminated by the statutory procedure. Key provisions: (1) Continuation tenancy (s.24): protected tenancy continues after contractual expiry on the same terms until terminated. (2) Landlord's s.25 notice: specifies whether landlord opposes renewal and on which ground(s); proposed terms if not opposing; must be served 6-12 months before the specified termination date. (3) Tenant's s.26 request: proactive renewal request specifying proposed commencement date (6-12 months ahead); landlord has 2 months to counter-notice opposing renewal. (4) Opposing grounds (s.30(1)): (a) failure to repair; (b) persistent rent delays; (c) substantial breaches; (d) alternative accommodation; (e) sub-letting of part; (f) demolition or reconstruction — landlord must show fixed, definite intention with planning, finance, and contractor in place; (g) own occupation — landlord must have owned for at least 5 years. (5) Compensation (s.37): for no-fault grounds (e)(f)(g) — 1× rateable value (2× if 14+ years' occupation). (6) Interim rent (ss.24A-24D): either party can apply; typically market rent. (7) Contracting out: exclude LTA 1954 protection by warning notice + statutory declaration before lease is granted.

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LTA 1954 s.38A and RRO 2003 (SI 2003/3096): excluding security of tenure from a commercial tenancy — prescribed warning notice (Sch 1/3); simple declaration (≥14 days, Sch 2) or statutory declaration before independent solicitor (<14 days, Sch 4); lease must record exclusion; each new lease requires fresh procedure; common pitfalls; Scotland has no equivalent.

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