Stamp duty land tax and Land Registry requirements for subleases

Registering an Underlease at the Land Registry


Post-completion formalities for underleases 

Once an underlease has been granted, there may be stamp duty land tax (SDLT) and Land Registry requirements to comply with.

Stamp duty land tax (SDLT) 

SDLT is a tax on land transactions, including the grant of an underlease. It is a self-assessment tax. The undertenant must submit a Land Transaction Return and payment (if any tax is due) to HM Revenue & Customs (HMRC) within 30 days of the “effective date” of the transaction. Usually, but not always, the effective date is the date of completion of the underlease.

The HMRC website has guidance on SDLT liability for leasehold transactions and a useful SDLT calculator. See https://www.gov.uk/guidance/stamp-duty-land-tax-leasehold-purchases.

The SDLT rules are complex, with many exceptions, exemptions and reliefs. If your transaction is not straightforward you should take specialist tax advice to ensure that you pay the correct amount of SDLT. 

Registration of underleases at the Land Registry

An underlease must be registered at the Land Registry if it has a term of over 7 years. If the underlease is not registered, it will not take effect as a “legal” lease but only as an “equitable” lease. This is less secure for the undertenant and will make future dealings with the lease more complicated for all concerned.

An application to register an underlease is made on Land Registry form AP1, assuming the tenant’s lease has its own Land Registry title. The underlease, a certified copy, and a fee must be submitted, together with evidence that any SDLT requirements have been met.

Further information about registering underleases can be found in Land Registry Practice Guide 25: https://www.gov.uk/government/publications/leases-when-to-register

Noting of underleases on superior registered titles 

If an underlease is not registrable, for example because its term is only 5 years, but the underlease grants easements, for example a right of way, over adjoining land belonging to the tenant or landlord, the undertenant must apply to the Land Registry to register the easements in the underlease.

This application is also made on Land Registry form AP1, and the underlease, a certified copy, and a fee must be submitted, together with evidence that any SDLT requirements have been met. Further information can be found in Land Registry Practice Guide 62: http://www.landregistry.gov.uk/professional/guides/practice-guide-62.

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