Disposition of leases and reversions

Power of deposition

Both landlords and tenants have legal estates which may pass to others on sale, by way of gift or under the rules of testate or intestate succession. The following is primarily concerned with disposition on sale, but it must be remembered that there are other occasions besides sale on which leases and reversions may pass to new owners.

Sale of the freehold reversions

It is always possible for the owner of the reversion in fee simple to sell his estate in the land. This will be done in the normal manner by conveyance, in the case of unregistered land, and by transfer and registration, in the case of registered land.

Unregistered land

In the case of unregistered land, the purchaser will acquire the fee simple subject to any legal lease which exists, regardless of whether he knew of its existence, for ‘Legal rights are good against the world.’ Thus the purchaser of the fee simple becomes the tenant’s new landlord and takes over most if not all of the original landlord’s rights and duties under the lease.

Registered land

Where the lease is granted for not more than seven years it will be an overriding interest under LRA 2002, Sch 3, para 1 and so will bind the purchaser of the fee simple even if he did not know of it.

If the lease is for more than seven years it must have been registered in order for it to take effect as a legal lease. When this is done the lease will also be noted on the charges register of the landlord’s title, and anyone who takes the landlord’s estate for valuable consideration will take subject to the lease.

Sale of the lease by the tenant

A sale of his leasehold estate by the tenant is also possible. The disposition of a lease is usually called an ‘assignment.’

Express assignment

Since the assignment of a lease is the conveyance or transfer of a legal estate it should be made by deed.

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For more information on:

  • Assignment by operation of law
  • Sale of a leasehold reversion