It is becoming increasingly common for reversionary leases to be granted. The term "reversionary lease" is sometimes used to describe a lease where possession of the property is delayed (i.e. the term does not commence until sometime after the grant) but more properly the term is used to describe a lease whose term only takes effect when an existing lease of the demised property expires and so there is no immediate right to possession under the terms of the reversionary lease. It is commonly used where the landlord and tenant want to extend the term of an existing lease.
However, care must be taken with reversionary leases, and the following should be noted:
- The term granted by the reversionary lease should not take effect more than 21 years from the date of the reversionary lease otherwise it will be void under Section 149 of the Law of Property Act 1925.
- The grant of any lease that takes effect in possession more than 3 months after the date of the grant is compulsorily registrable at the Land Registry no matter how long the term being granted is and so in normal course a reversionary lease is compulsorily registrable at the Land Registry.
- For SDLT purposes the effective date for the purposes of making the SDLT return and payment is the date of grant rather than the future term commencement date (unless an agreement for lease has been used, this will then dictate the relevant date).