New Lease Grant on Surrender of Old Lease: Non-Cash Consideration Rules

SDLT treatment of lease surrenders and regrants between the same parties

When the same landlord and tenant agree to surrender an existing lease and replace it with a new one, SDLT rules ignore the surrender and the new grant as consideration for each other. This prevents double counting, but any other consideration, such as a premium or rent, must still be assessed under the normal SDLT rules.

• The rule applies only where there is an existing lease, it is surrendered, and a new lease is granted in return.
• The landlord and tenant must be the same parties for both the surrender and the new lease.
• The surrendered lease is not treated as chargeable consideration for the new lease.
• The grant of the new lease is not treated as chargeable consideration for the surrender.
• Other consideration, including cash payments, rent, or linked obligations, may still be chargeable to SDLT.
• Care is needed in practice to confirm that the legal arrangement is truly a surrender and regrant between the same parties.

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SDLT and lease regrants: when surrendering an old lease is ignored as consideration

This page explains a narrow but important SDLT rule for lease transactions. Where the same landlord and tenant agree that an existing lease will be surrendered and a new lease will be granted instead, the surrender of the old lease is not treated as chargeable consideration for the new lease, and the grant of the new lease is not treated as chargeable consideration for the surrender. The point matters because, without this rule, the parties could appear to be giving each other something of value and that could distort the SDLT analysis.

What this rule is about

In lease transactions, SDLT is charged by reference to chargeable consideration. Consideration is not limited to cash. It can include something else of value given for the transaction.

That creates a potential problem where an old lease is given up and a new lease is granted between the same parties. Looking only at the mechanics, the tenant gives up rights under the old lease and receives rights under the new one. The landlord gives the new lease and receives the old one back. If each step were treated as consideration for the other, there could be unnecessary complexity and possible double counting.

The rule in Schedule 17A paragraph 16 Finance Act 2003 deals with that situation.

What the official source says

The official material states that where a new lease is granted in consideration of the surrender of an existing lease between the same parties:

• the surrender does not count as chargeable consideration for the grant of the new lease, and
• the grant of the new lease does not count as chargeable consideration for the surrender.

The key conditions stated in the source are:

• there must be an existing lease that is surrendered,
• a new lease must be granted,
• the new lease must be granted in consideration of that surrender, and
• the transaction must be between the same parties.

What this means in practice

If this rule applies, you do not treat the giving up of the old lease as consideration for the new lease when working out SDLT on the grant. Equally, you do not treat the grant of the new lease as consideration for the surrender.

In practical terms, this means the SDLT position on the new lease must be worked out without attributing value to the surrendered lease itself as consideration, at least for this specific purpose. If there is other consideration, such as a premium or rent under the new lease, that still needs to be considered under the normal SDLT rules.

The rule is therefore best understood as a carve-out. It prevents the surrender and regrant, by themselves, from being treated as reciprocal non-cash consideration where the same parties are involved.

How to analyse it

A sensible way to approach the point is:

• Identify whether there is an existing lease that is actually being surrendered.
• Check whether a new lease is being granted as part of the same overall arrangement.
• Confirm that the landlord and tenant are the same parties for both the surrender and the new grant.
• Ask whether the new lease is being granted in consideration of the surrender of the old lease.
• If so, leave the surrender out of account as chargeable consideration for the new lease, and leave the grant out of account as chargeable consideration for the surrender.
• Then look separately at any other consideration that may still be chargeable, such as money, rent, or anything else given as part of the transaction.

This is a targeted rule. It answers one question only: whether the surrender and the regrant count as chargeable consideration for each other. It does not, by itself, determine the whole SDLT treatment of the transaction.

Example

Illustration: A tenant holds a lease from a landlord. They agree that the old lease will be surrendered and, in return, the landlord will grant a new lease to the same tenant. On these facts, the surrender of the old lease is not treated as chargeable consideration for the new lease. Likewise, the grant of the new lease is not treated as chargeable consideration for the surrender.

If the tenant also pays a cash premium for the new lease, that cash payment would need to be considered separately under the normal SDLT rules. The source material here does not say that all consideration is ignored. It says only that the surrender and the grant are not treated as chargeable consideration for each other.

Why this can be difficult in practice

The source is very short, but real transactions can be more complicated.

One issue is whether the parties are truly the same. If the old lease and the new lease do not involve the same landlord and tenant, the wording of this rule may not fit.

Another issue is identifying what counts as consideration for what. In some lease restructurings there may be additional payments, changes in obligations, or linked steps. This rule does not say that those other elements are ignored. It only deals with the surrender and the grant as consideration for each other.

A further practical point is that a transaction described commercially as a “regrant” may still need careful legal analysis. The source assumes there is a surrender of an existing lease and a grant of a new lease. Whether that is in fact what has happened will depend on the legal structure of the arrangement.

Key takeaways

• Where the same parties agree a surrender of an old lease and a grant of a new lease, the surrender is not chargeable consideration for the new lease.
• The grant of the new lease is also not chargeable consideration for the surrender.
• This does not remove the need to consider any other chargeable consideration in the transaction.

This page was last updated on 24 March 2026

Useful article? You may find it helpful to read the original guidance here: New Lease Grant on Surrender of Old Lease: Non-Cash Consideration Rules

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