Businesses urged to remember to register longer leases

by Iain Mason

Businesses which rent their premises should remember that a lease granted for a term of more than seven years must be registered with the Land Registry.

And they are also being reminded that a Stamp Duty Land Tax (SDLT) return must be submitted to HMRC if they are to avoid heavy penalties

Our legal team here at Optimum are currently helping a client whose ten year lease wasn’t registered by the solicitor acting for her on the grant of the lease nor was a return made for SDLT, resulting in a penalty being imposed by HMRC.

If a lease is to run for seven or more years it has to be registered with the Land Registry. A Stamp Duty Land Tax return also has to be completed, even if no stamp duty is owing.

In the case of our client, she wasn’t liable to pay any stamp duty but she has been issued with a penalty of £400 from HMRC for not sending in a return. Had she been liable to tax as well, HMRC could well claim interest as well as the tax which is owing.

The issue came to light when the client went to sell her business and transfer the lease to the buyer. What should have been straightforward has become more complicated because when she opened the business and moved into the premises these two important requirements – registering with the Land Registry and completing the SDLT return – weren’t carried out.

So what should a business be aware of?

• A Stamp Duty Land Tax return may be required on completion of the lease
• The lease may need to be registered with the Land Registry following completion
• Check carefully the repair and maintenance responsibilities
• Arrange for a survey to be carried out and a schedule of condition to be prepared which will limit your repairing obligations as tenant. Negotiate a break clause, where appropriate, which will allow you to end the lease before the full term has expired should the business not be doing as well as you had planned for example. Strict procedures for exercising the break clause will be incorporated into the lease and expert advice is essential
• Seek legal advice before agreeing the heads of terms, and definitely before signing any lease document

For legal advice or help with any business lease issues, please get in touch with the legal team here at Optimum Professional Services.