Tenant’s obligations that do not count as chargeable consideration is covered at LBTT(S)A 2013 Schedule 19, Paragraph 15. None of the following count as chargeable consideration:
- any undertaking by the tenant to repair, maintain or insure the leased premises;
- any undertaking by the tenant to pay for services, repairs, maintenance, insurance or the landlord’s costs of management;
- any other obligation undertaken by the tenant that would not affect the rent that a tenant would pay in the open market;
- any guarantee of the payment of rent or the performance of any other obligation by the tenant under the lease;
- any penal rent or increased rent in the nature of penal rent, payable as a result of a breach of an obligation of the tenant under the lease;
- any other obligation of the tenant to bear the landlord’s reasonable costs or expenses of, or incidental, to the grant of a lease;
- any obligation under the lease to transfer to the landlord, on termination of the lease, payment entitlements granted to the tenant under the single payment scheme (the scheme of income support for farmers under Title III of Council Regulation (EC) No 73/2009 in respect of the land subject to the lease);
- a payment made in discharge of any of the obligations in this list; or
- the release of any of the obligations in this list in relation to the renunciation of a lease.
In the case of an assignation of a lease the assumption by the assignee of the obligation—
- to pay rent, or
- to perform or observe any other undertaking of the tenant under the lease,
does not count as chargeable consideration for the assignation.
This is covered at LBTT(S)A 2013, Schedule 19, Paragraph 16.
Any reverse premium paid:
- by the landlord to the tenant where a lease is granted;
- by the assignor to the assignee when a lease is assigned; or
- by the tenant to the landlord when a lease is renounced
will not be chargeable consideration. This is covered at LBTT(S)A 2013 Schedule 19, Paragraph 14.
Where a landlord and tenant agree to grant a new lease in consideration of the renunciation of an existing lease between them, the grant of the new lease does not count as chargeable consideration for the renunciation transaction and the renunciation does not count as chargeable consideration for the grant of the new lease.
This is covered at LBTT(S)A 2013 Schedule 19, Paragraph 18.
Service charges payable from the tenant to the landlord are a payment for services the tenant will use throughout the duration of the lease. As such, service charges are not rent and therefore not chargeable consideration for LBTT purposes and would ordinarily be excluded from the calculation as long as the payment of the service charge has been either:
- provided for in the lease as a separate figure or
- expressed in the lease as part of an inclusive rent payment and apportioned on a just and reasonable basis.
Therefore, if the service charge is separate from the rent, only the rent amount will be chargeable consideration for LBTT purposes.
Where a single sum is payable in respect of rent or of rent and service charges and:
- there is no apportionment between rent and service charge and/or
- the service charge is not separately provided for in the terms of the lease,
then the sum is to be treated entirely as rent for LBTT purposes and the whole amount would be chargeable consideration.
Service charges are the most common item of non-chargeable consideration for a lease, but the above treatment applies equally to other non-chargeable consideration.