Guide on Rent Payable Before Grant with Examples and Provisions

SDLT treatment of rent paid before a lease is formally granted

For SDLT, a payment called rent is not automatically treated as lease rent if it relates to a period before the lease legally starts. The key is to check when the lease was granted, what legal arrangement covered any earlier occupation, and what the payment was really for.

• SDLT on leases can depend on both any premium and the rent payable under the lease.
• If a tenant pays for occupation before the lease is granted, those sums may fall under an earlier arrangement instead of the lease itself.
• The label used by the parties is not decisive; SDLT looks at the legal nature of the payment and the facts.
• Advisers should review when the lease was legally granted, whether the tenant was already in occupation, and under what terms.
• Documents such as a licence, tenancy at will, or agreement for lease may explain pre-grant payments and change the SDLT analysis.
• This is a fact-sensitive area, so small differences in timing, drafting, or the structure of occupation can affect the result.

Scroll down for the full analysis.

SDLT and rent paid for a period before a lease is granted

This page explains a narrow but important SDLT point: when a payment described as rent relates to a period before the formal grant of a lease. That matters because SDLT on leases depends heavily on what counts as rent and when the lease is treated as beginning.

What this rule is about

In lease transactions, SDLT can be charged by reference to rent as well as any premium. Problems can arise where the parties agree that the tenant will make payments for a period before the lease is formally granted. The question is whether those payments are treated as rent under the lease, and if so, how they fit into the SDLT analysis.

This issue often appears where a tenant is allowed into occupation before completion of the formal lease, or where documents are backdated in economic effect even though the legal grant happens later. The label used by the parties is not always decisive. What matters is the legal nature of the payment and the period to which it relates.

What the official source says

The source material identifies a specific SDLT topic: rent payable for a period before the grant of a lease. It also indicates that HMRC deals with the point through examples. Although the extract provided is only a contents page, the underlying issue is that SDLT rules for leases may need to address payments that are said to be rent even though they relate to time before the lease is actually granted.

The practical legal question is whether such payments are properly treated as rent under the lease, or whether they are something else, such as consideration for an earlier arrangement or for occupation before the lease existed.

What this means in practice

You should not assume that every pre-grant payment called rent is automatically lease rent for SDLT purposes.

In practice, you need to separate three possible situations:

• there was already an earlier legal arrangement giving rise to occupation and payments before the formal lease;
• the formal lease, once granted, is intended to govern the earlier period as well;
• the payment is not truly rent under the lease at all, even if the parties use that word.

This matters because SDLT on leases is sensitive to the amount and timing of rent. If a payment falls within the rent stream under the lease, it may affect the SDLT calculation. If it does not, the analysis may be different.

Conveyancers and advisers therefore need to look beyond the rent schedule and ask what legal rights existed before grant, when the lease was actually granted, and what the payment was really for.

How to analyse it

A sensible way to approach the issue is to ask the following questions:

• When was the lease legally granted?
• Was the tenant already in occupation before that date?
• If so, on what legal basis was that occupation held?
• What do the documents say the pre-grant payments are for?
• Do the payments arise under the lease itself, or under an earlier licence, agreement for lease, tenancy at will, or other arrangement?
• Is the payment genuinely rent for leasehold occupation, or consideration of another kind?
• Does the drafting try to attach lease rent to a period when the lease did not yet exist?

You should also compare the commercial reality with the legal form. A payment may be described as rent, but SDLT treatment depends on the legal character of the arrangement, not just the wording chosen by the parties.

Example

Illustration: a tenant is allowed into a unit on 1 January under a temporary occupation arrangement while the formal lease is negotiated. The lease is then granted on 1 April. The documents state that the tenant must pay monthly sums from January onwards, and the lease refers to those sums as rent.

The SDLT question is not answered simply by that label. You would need to identify whether the January to March payments were due under the temporary arrangement, or whether the lease, once granted, legally treats them as rent under the lease. The answer may affect how the lease consideration is analysed for SDLT.

Why this can be difficult in practice

This area can be fact-sensitive because property transactions often involve early access, conditional occupation, agreements for lease, fitting-out periods, or informal arrangements before completion. The documents may not line up neatly with what happened on the ground.

Difficulty can also arise because:

• the parties may use the word rent loosely;
• there may be more than one document governing occupation;
• the tenant may have occupied before the lease without a full lease yet existing;
• payments may serve mixed purposes, such as occupation, exclusivity, or contribution to costs.

Where the source material is applied through examples, that usually signals that outcomes depend heavily on the exact facts and drafting. Small differences in timing or legal structure may change the SDLT analysis.

Key takeaways

• A payment described as rent is not automatically rent under a lease for SDLT purposes if it relates to a period before the lease was granted.
• The key issues are when the lease was legally granted, what arrangement governed earlier occupation, and what the payment was truly for.
• Pre-grant occupation and pre-grant payments should be analysed carefully against the actual documents and facts, not just the labels used.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: Guide on Rent Payable Before Grant with Examples and Provisions

View all HMRC SDLT Guidance Pages Here