What is a Deed of Variation?
A Deed of Variation changes the terms of a previously agreed Deed, such as one involving property.
For example, maybe you want to vary the terms of a residential or commercial lease. If a tenant is thinking of selling a flat which he has owned for two or more years, he may wish to extend the term of the lease to make the flat a more attractive proposition to a potential buyer and, perhaps more importantly, to a lender.
Under the Leasehold Reform Housing and Urban Development Act 1993, the tenant may agree with the landlord an extension of 90 years and this would require a Deed of Variation. A premium would be payable by the tenant to the landlord in consideration of the additional term being granted and there is a formula on which that premium is based.
Another reason for a Deed of Variation might be to vary the route of an agreed right of way, whether within the terms of a lease or in relation to freehold property. Alternatively, a Deed of Variation may be in relation to altering the terms of a Will, in which case all the beneficiaries must join in the Deed of Variation in order to redirect some or all gifts made under the Will after the person who wrote it has died.
This is usually done as a tax-saving exercise and must be done within two years of their death. An example would be where a grandparent has died and left his or her Estate to their son and daughter and that son and daughter do not wish to receive the money from the Estate, as it would increase the size of their own Estate on which Inheritance Tax would be payable. In those circumstances, the son and daughter may wish to enter into a Deed of Variation to redirect the money from the grandparent’s Estate to the grandchildren.
Whatever the reason for a Deed of Variation, it is essential that all relevant parties are clear as to its terms and are in full agreement. This would also include any lender.
Where reference to a plan is necessary, for example, to alter the route of a right of way, a plan that complies with Land Registry rules and regulations would need to be produced and agreed.
For more information get in touch with our Conveyancing Solicitors.
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