Deed of Variation
On occasion, it may transpire that a contract that has previously completed between two or more parties contains an error or omission in the drafting. Alternatively, it might be that the parties have since decided that they wish to contractually deal with a particular matter, which was not originally considered or included. As the original agreement has completed and is legally in place, it is necessary to have a separate agreement – a Deed of Variation – entered into by the original parties, to reflect any changes.
Deed of Variation
It is possible that a completed lease may contain a mistake – perhaps an erroneous reference to the description of the property demised, or the misspelling of either an individual’s, or corporate body’s name. Alternatively, the lease may have omitted an agreement made between the parties during the initial negotiation – for example, a right to park a car on a particular part of the surrounding estate of which a property forms part. Where a lease has been legally completed, it sits in place as a binding agreement and unfortunately, it is not a case of simply writing on the document to include the additional or amended provisions.
A Deed of Variation will be required to give legal effect to the changes, which will be read alongside the completed lease as incorporated into it.
When is a Commercial Lease Deed of Variation needed?
An agreement for variation of a contract must either be supported by a consideration – a payment or other action given by one party to another – or made by deed. If a variation is only capable of benefiting a single party (or capable of benefiting multiple parties, but is, in fact, made only for the benefit of one) it will not generate its own consideration.
To avoid any dispute as to whether the variation was supported by consideration, the Firm’s advice is generally that the variation document is executed as a deed. The Deed of Variation will operate in a similar fashion as for the lease, in that it will give legal effect to any changes to be made to a contract and be read alongside the completed contract as incorporated into it.
What are the pitfalls of a Deed of Variation?
In respect of agreements and leases that have been registered at HM Land Registry, there can be additional complications when seeking to make additions or amendments. Care must be taken to ensure extra registration requirements are adhered to. For example, a variation that reduces the extent of the land included in a lease will amount to a deed of surrender of the part no longer included in the lease – this will materially affect the lease that remains in place for the balance of the property.
Any addition of land to a lease that is already registered will take effect as a surrender by operation of law of the existing lease and as the grant of a new lease of both the land comprised in the original lease and the land that is being added.
Similarly, a variation that purports to extend the term of an existing lease can only take effect in law by way of a deemed surrender by operation of law of the existing lease and the grant of a new lease for that extended term. These variations can have potentially adverse “chain reactions” to the original documents they seek to amend, and professional advice should always be taken on the whole scenario, to ensure that any variations do not unwittingly create additional problems.
What is the process for a Commercial Lease Variation?
Ideally, all parties to the original contract will appoint their own legal representatives. One party might choose to proceed unrepresented. However, it is crucial that all parties understand the fundamental legal operation of a Commercial Lease Variation and its effect on the original agreement.
The parties will usually negotiate what amendment, addition, or deletion is required and agree this between themselves. Legal representatives will seek confirmatory instructions and confirm with their respective clients. One of the legal representatives will draft a suitable Deed of Variation, which will be offered to the other parties’ representative for comment and/or approval. Each of the parties will receive professional advice on the Deed of Variation before it is signed and completed (and if necessary, registered at HM Land Registry).
