A Lease Of The Reversion VS A Reversionary Lease: Why It’s Important To Know The Difference

When it comes to business leases, the possibilities are endless and such leases can take on various forms.

With each of those forms comes a distinctive set of legal rules and formalities which must be complied with. These will be important to consider in order to ensure that the lease you have entered into reflects the unique commercial agreement between the parties, which is at the core of the lease. One of the lesser-known distinctions to be mindful of in these situations is the delicate distinction between a lease of the reversion and a reversionary lease.

A lease of the reversion is where the (original) landlord, who often owns the freehold interest, grants a new lease of their interest in a property, which is already the subject of a lease. This new tenant will then become the “intermediate landlord” per say, for the purposes of the original lease, as their interest in the property is granted subject to, and with the benefit of, that already existing lease.

A lease of the reversion can be for a term that is longer or shorter than the pre-existing lease (or exactly the same length). When the term is longer than that of the original lease term, then upon expiry of the original lease term, the tenant under the lease of the reversion will be entitled to occupy the property.

This act of creating a lease of the reversion will affect the pre-existing landlord and tenant relationship under the original lease in different ways depending on whether the original lease is considered an ‘old’ or ‘new’ lease. Therefore, if you are a tenant who is a party to a lease of the reversion, it is important seek legal advice in order to know and fully understand the type of lease which you are taking an interest subject to, and gain a clear picture of what the implications will be for you during the term that your lease is granted.

Alternatively, a reversionary lease is what is known as a lease which commences after the existing lease of the property has expired. The term can also refer to an executed lease where possession of the property commences at a later date than execution, meaning the tenant does not have an immediate rights in relation to the property such as receiving rents or physically occupying.

Such leases must be drafted within certain limits in order to ensure they are valid and enforceable. For example, a reversionary lease is considered void if the commencement of the term is postponed to more than 21 years from the date of execution of the lease.

Various other formalities will also apply to reversionary leases. Namely, where commencement of the term takes place more than three months after the grant of the reversionary lease, this will mandate registration of the lease against the title of the property at the Land Registry, regardless of the actual length of the term of the lease.

How Wilson Browne can help

Wilson Browne’s Commercial Property Solicitors provide expert advice on leases of the reversion and reversionary leases, helping landlords and tenants navigate complex legal requirements with confidence. We draft and review commercial leases, explain the legal and practical implications, and ensure all formalities and Land Registry requirements are correctly handled. Our commercially focused approach helps protect your interests and avoid costly disputes.