What is a Deed of Variation in Property Transaction?

During a conveyancing transaction, it is sometimes the case where you, your conveyancing solicitor or any mortgage lenders might not agree with certain provisions within a Deed affecting the property. In our experience, the need to vary the original provisions of an original deed is becoming more and more common, especially when purchasing a Leasehold property. Under English Law, when such a need arise, any changes to an original Deed can only be made by another Deed. As such, the Deed which varies the original terms of another Deed is simply known as a Deed of Variation.

Deeds of Variation are also commonly used when dealing with Deceased Estates. It is not the scope of this article to discuss matters relating to Wills and Probate. We will only be looking at what a Deed of Variation is in the context of Property Law.

When is such a Deed Commonly Used?

 A Deed of Variation’s use can be both simple and complex depending on the purpose it is intended to be used for.

Simple use cases for such a deed could be the following:

• Changing the completion date: If either party is unable to complete the transaction on the agreed-upon completion date, a deed can be used to change the completion date.
• Modifying the terms of the contract: If either party wishes to modify the terms of the contract, such as the price or any special conditions, a deed can be used to document the changes.
• Extending the completion deadline: If either party requires more time to complete the transaction, a deed can be used to extend the deadline.

Examples where complex uses for a Deed of Variation could be –

• Correcting omissions on an original Deed which has been executed and registered at the Land Registry.
• Varying Rent Review Provisions: This is quite a common occurrence. Most long residential leases granted in the past contained rent review provisions which are now considered unacceptable by most mortgage lenders. This can only be done carrying out a Deed of Variation.
• Varying Lease Forfeiture Rights: As above, sometimes, mortgage lenders do not agree with the powers granted to a freeholder or superior landlord in connection to what they can and cannot do. If a transaction is to proceed under these conditions, a lender may insist that such onerous provisions within the lease are first amended. A Deed of Variation is again required.

 Understanding the Legal Requirements for a Valid Deed of Variation

For a Deed to take effect, it must be registered at the Land Registry as per The Land Registration Act 2002. Any subsequent transfer of this registered Deed, must also be carried out by Deed, again as per The Land Registration Act 2022. The same principal applies where any amendments you wish to make to an already, registered Deed must therefore be carried out by a Deed.

Where it is discovered that the ‘Original Deed’ has been entered into and you immediately recognise that there are issues/inconsistencies or errors prior to it being registered at the land registry, so long as all parties agree, manuscript amends without the need for a Deed of Variation.

In order for a Deed of Variation to be valid, all parties involved must agree to the changes made to the contract. Once the deed is executed and signed by all parties, it becomes a legally binding document.

It is recommended that all parties seek the advice of a legal professional before creating and signing any deed to ensure that the changes made are legally enforceable and do not conflict with any existing legal obligations or requirements.

Key Considerations Before Entering into a Deed of Variation

 Here are some key considerations to keep in mind before entering into such a deed on on a property transaction in England and Wales:

• Purpose of the Variation: A deed allows for changes to be made to an existing contract or agreement. Before entering into a Deed of Variation, it’s important to clearly understand the purpose of the variation and why it’s necessary.
• Parties Involved: All parties involved in the original agreement should also be involved in the deed. This includes any lenders, guarantors, or other parties that may be affected by the changes being made.
• Legal Advice: It’s highly recommended that all parties seek independent legal advice before entering into a deed. This can help ensure that everyone fully understands the implications of the changes being made and that the deed is legally valid.
• Terms of the Variation: The terms of the variation should be clearly outlined in the deed. This includes any changes to the purchase price, completion date, or any other terms of the original agreement.
• Tax Implications: Depending on the changes being made, there may be tax implications to consider. For example, if the variation involves a change in the purchase price, this could affect stamp duty land tax.
• Deadline for Completion: If the variation involves changes to the completion date, it’s important to ensure that all parties agree on a new deadline for completion.
• Effect on Other Agreements: It’s important to consider the impact that the deed may have on any other agreements that are in place. For example, if the original agreement included a mortgage, the lender may need to give their approval before the variation can be made.
• Registration: Once the deed has been signed, it should be registered with the Land Registry to ensure that the changes are legally binding.

By keeping these considerations in mind, parties can ensure that any changes made to a property transaction through a Deed of Variation are done so in a legally sound and transparent manner.

How to Draft the Deed: Tips and Best Practices

 Here are some tips and best practices for drafting a Deed of Variation:

• Use Clear Language: The language used in the Deed of Variation should be clear and unambiguous. It’s important where possible to minimise technical language that may be difficult for non-legal professionals to understand.
• Include Relevant Parties: The Deed of Variation should include all relevant parties involved in the original agreement, as well as any new parties that are being added as a result of the variation.
• Outline the Purpose of the Variation: The Deed of Variation should clearly state the purpose of the variation and why it’s necessary. This can help ensure that all parties involved are on the same page and understand the changes being made. Typically, this section is commonly also called the ‘Background’.
• Identify the Changes: The Deed of Variation should clearly identify the changes being made to the original agreement. This can include changes to the purchase price, completion date, or any other terms of the agreement.
• Specify Conditions: The Deed of Variation should specify any conditions that need to be met before the variation can take effect. This can include obtaining the approval of any relevant third parties, such as a mortgage lender or guarantor.
• Include Appropriate Execution Provisions: The Deed of Variation should include execution requirements, such as signatures and witness requirements, to ensure that the document is legally binding.

By following these tips and best practices, parties can ensure that the Deed of Variation is legally sound and accurately reflects the changes being made to the original agreement. It’s important to seek independent legal advice and to carefully consider all aspects of the variation before signing the document.

Alternatives: When Another Approach May Be Better

While a Deed of Variation can be a useful tool for making changes to a property transaction, there may be situations where another approach may be better. Here are some alternatives to a Deed of Variation.

Re-Negotiation: If the changes to the original agreement are significant or complex, it may be more appropriate to renegotiate the terms of the agreement rather than making changes through a Deed of Variation. This may be the most efficient way of addressing any amendments required, where doing so would be possible.

Surrender and Regrant: If the changes being made are significant enough, it may be appropriate to terminate the original agreement and enter into a new one.

Additional Deed: Another alternative to a Deed of Variation is an additional agreement, which can be used to add new terms to an existing agreement. This is what is known as a supplemental agreement or supplemental deed. This can be useful if the changes being made are relatively minor. Ultimately, the goal should be to find an approach that is legally sound, practical, and minimises the risk of any disputes or misunderstandings in the future.

It’s also important to note that some changes may not be possible to make through any of these alternatives, and a Deed of Variation may be the only option. Therefore, it’s essential to assess the situation thoroughly before deciding on the best approach.

 Registering a Deed of Variation

Once the Deed of Variation has completed, the Deed must be registered at the Land Registry (HMLR). The process of doing so begins with completing a Land Registry form AP1. This form is used to update the register of the property with the details of the deed of variation. The AP1 then accompanies the Deed of Variation (with the appropriate fee) which HMLR will review and request additional information or documentation if necessary.

Once the application has been approved, HMLR will update the property register to reflect the changes made by the deed of variation.

It is worth noting that the process may take several weeks, and the fee for registering a deed of variation will depend on the value of the property involved.