Post completion for grant of lease

Question 1

With a freehold or long leasehold (999 years) where a premium is paid, can that premium be taken as the basis of the SDLT or LTT calculation?

Answer 1

Yes.

Question 2

What is the Net Present Value?

Answer 2

With a short lease with market rent payable, the first step is to calculate a lump sum equivalent of the rent over the years it’s payable.

Question 3

What does the Net Present Value, once calculated, form the basis of?

Answer 3

It forms the basis of the SDLT or LTT calculation.

Question 4

What do you need to calculate the NPV?

Answer 4

• start date of the lease, and lease term (eg 10 years)
• the rent payable for each of the first five years

(must include the rent plus VAT)

Question 5

Net Present Value example..

Answer 5

A tenants takes a ten year lease of an office at a rent of £200,000 per year plus VAT, with a rent review on the fifth anniversary. Using the online calculator, you would enter £240,000 for each of the first five years. The NPV is £1,995,985.

Question 6

What is SDLT assessed on?

Answer 6

The Net Present Value.

Question 7

What are the different percentage rates which apply to slices of the total purchase price (SDLT on commercial leases)?

Answer 7

• up to £150,000 there’s no SDLT payable
• over £150,000 up to £5 million, SDLT of 1% is payable
• over £5 million, SDLT of 2% is payable

Question 8

What is SDLT rounded to?

Answer 8

The nearest pound.

Question 9

SDLT on commercial leases - example…

Answer 9

A lease of 10 years with £200,000 plus VAT, rent review at 5 years gives an NPV of £1,995,985.

The first £150,000 is free of SDLT, so it’s the remaining £1,995,985 less £150,000 = £1,845,985 that’s charged at 1%.

The SDLT payable is £18,459.

Question 10

What is LTT assessed on?

Answer 10

The Net Present Value.

Question 11

What are the different percentage rates which apply to slices of the total purchase price (LTT on commercial leases)?

Answer 11

• up to £225,000 there’s no LTT payable
• over £225,000 up to £2 million, LTT of 1% is payable
• Over £2 million, LTT of 2% is payable

Question 12

Is LTT rounded to the nearest pound?

Answer 12

No.

Question 13

LTT on commercial leases - example…

Answer 13

A lease of 10 years with £200,000 plus VAT, rent review at 5 years gives an NPV of £1,995,985.

The first £225,000 is free of LTT, so it’s the remaining £1,995,985 less £225,000 = £1,770,985 that’s charged at 1%.

The LTT payable is £17,709.85.

Question 14

Do all leases need to be registered?

Answer 14

No - leases are treated differently depending on the length of term granted.

Question 15

Lease up to three years…

Answer 15

• doesn’t need to be registered
• can’t be noted against the landlord’s title

Question 16

Lease more than 3 years up to 7 years…

Answer 16

• doesn’t need to be registered
• can be noted against the landlord’s title (will appear in the schedule of leases to the landlord’s freehold title)

Question 17

Lease more than 7 years…

Answer 17

• must be registered at Land Registry (and will be given its own title number)
• will be noted against landlord’s title (will appear in schedule of leases to the landlord’s freehold title)

Question 18

If a lease is registrable, which searches should be carried out before completion?

Answer 18

OS1 (lease of whole) or OS2 (lease of part) should have been carried out before completion to give priority.

Question 19

What form does the tenant use to apply to register the lease?

Answer 19

Form AP1 (if the landlord’s title is registered) or FR1 (if the landlord’s title is unregistered).

Question 20

Does a certified copy of the lease need to be scanned?

Answer 20

Yes, a certified copy of the lease may be scanned & submitted electronically.

Question 21

If the landlord’s freehold title is charged, will a letter of consent from the lender be needed?

Answer 21

Yes.

Question 22

How many official copies will the tenant’s solicitor receive on completion of the application?

Answer 22

Two (new leasehold title & updated landlord’s title)

Question 23

If the tenant is a company, will the lease be charged & is there need to register the transaction at Companies House?

Answer 23

No, usually the lease will not be charged and so there’s no need to register the transaction at Companies House.