During the term of a lease, circumstances can change and one or both of the parties may feel that the lease should be varied to take account of them. Recently, here at JMW Solicitors, we have found that a number of clients, both landlords and tenants, have been looking into re-gearing leases. Typically this will involve the landlord agreeing to a reduction in the rent in return for the tenant committing itself to stay at the property for a longer period.

If a landlord or tenant makes a decision to vary a lease, for whatever reason, it is obviously essential that the variation is properly documented. There are a number of traps for the unwary.

The majority of leases are executed as deeds. However, this does not mean that they can only be varied by means of a further deed. Ill-judged exchanges of correspondence can result in uncertainty for both the landlord and tenant or serious difficulties for one of them. For the sake of clarity it is highly desirable, in the majority of cases, to instruct solicitors to complete the proper documentation. There may be an initial expense, but proceeding in this way may prevent costly disputes or losses in the future. In negotiations it is often prudent for the parties to make it clear that the correspondence is subject to contract and that the parties are working toward completion of a formal deed or deeds which will be drafted by solicitors and registered at the Land Registry as necessary.

A problem that can occur with the variation of a lease when the parties are not properly advised is that the variation can take effect as an unintentional surrender of the original lease and the grant of a new one. This can have a number of unfortunate consequences from a landlord's or a tenant's perspective including additional costs. There will be a surrender and re-grant by operation of law where the term of the lease is made longer or the area of the property let is made bigger. These difficulties can be avoided by completing the appropriate documentation rather than a straightforward deed of variation.

A further problem that may not generally be appreciated is that landlords can potentially lose the benefit of guarantors' covenants if the variation is not properly documented. There is old case law to the effect that any substantial variation in the duties owed by the principals to a contract should be expressly approved by the guarantor for his covenant to remain binding. This old case law can apply to variations to a lease and may have the effect of releasing the guarantor from all future liability should the terms of the lease be altered by the landlord and the tenant without obtaining his consent. More recent case law has gone some way toward relaxing the general rule, so as to apply it to variations that involve a change in the nature or extent of the tenant's obligations. However, the safest way to proceed is to ensure that a guarantor is in all cases a party to any variation to a lease.

The message that landlords and tenants should take from all of this, whether they are thinking of re-gearing or other lease variations, is that they should seek specialist advice and complete proper documentation.