The price of surrender

Stamp duty is now chargeable when a lease is surrendered by operation of law, writes Sarah Wheeler

Section 128 of the Finance Act 2000 will make stamp duty chargeable on most surrenders by operation of law.

It does so by providing that any document evidencing the surrender of a lease shall be treated as if it is a deed effecting the surrender for stamp duty purposes.No charge to stamp duty arises where it is clear that it has already been paid on another document.

The lessor must show that a deed, written agreement or lease has been properly stamped.

The document must relate to the surrendered property.

In the case of a lease, the lessor must have granted the new lease in consideration for the surrender.

Otherwise, at least one of the documents evidencing the surrender must be properly stamped.

If you want to apply to close a registered leasehold title or to remove entry of a notice of the surrendered lease from the registered reversion, the Land Registry will require evidence of the acts that gave rise to the surrender.

Practice Leaflet 1, which you can get from any district land registry, gives further details of their requirements.

Section 128 will only change these requirements in one respect.

You must now also show that any stamp duty has been properly paid.

Usually, where the surrender is by operation of law, you should provide a statutory declaration by somebody who knows all the relevant facts.

This would seem the best document to have stamped.

You could, however, have any document evidencing the surrender stamped, for example, a receipt or letter of consent from the lessee.

In all cases, your application should include a document that:

l contains detailed information about the acts that amount to the surrender;

l confirms that no instrument of surrender was entered into;

l recites the consideration (if any) paid for the surrender; and

l shows that stamp duty has been properly paid.

Section 128 only catches leases surrendered after the Finance Act received royal assent.

Therefore, if your application relates to a lease surrendered before 28 July 2000, when the Act received the royal assent, you should make this clear in your statutory declaration.

You may also want to include any relevant certificate of value or exemption certificate in your statutory declaration.

Where the lessor pays the lessee for the surrender, or some other consideration passes, the surrender operates as a transfer on sale.

If you can include a certificate that the current stamp duty threshold is not exceeded, you may send your application, together with a properly completed form L(A) 451, direct to the Land Registry (see www.landreg.gov.uk for a full list of regional offices).

However, if it exceeds the current stamp duty threshold, you must first have the document marked 'produced' and stamped with any ad valorem stamp duty.

Where no consideration passes, the Land Registry will treat the surrender as a transfer not on sale.

You should submit the document to the Stamp Office for adjudication and payment of any fixed duty unless it contains the relevant certificate under category L of the Stamp Duty (Exempt Instruments) Regulations 1987.

If the document correctly contains such a certificate, you do not need to submit it for stamping.

The Land Registry is in the process of issuing a public information leaflet which will give further details about this change.

Any comments arising from the above should be addressed to Sarah Wheeler at Land Registry Headquarters, Lincoln's Inn Fields, London WC2A 3PH (DX: 1098 London/Chancery Lane WC2, tel: 020 7917 8888, extension 4452,fax: 020 7955 0110.

Sarah Wheeler is an assistant land registrar at the Land Registry