CA33050 - IBA: Relevant interest:
Termination of lease
CAA01/S359
The relevant interest may be a lease. Sometimes there is a
balancing event when a lease that is the relevant interest
terminates but in other cases there is "continuation" treatment so
no balancing adjustment arises. When a lease, which is the relevant
interest in a building, terminates the following rules apply:
- If the lessee remains in possession of the
building with the lessor's consent without a new lease being
granted, the lease that has terminated is treated as continuing for
as long as the lessee remains in possession. While the lease that
has terminated is treated as continuing there is no balancing
event.
- If there was an option, in the lease that
has terminated, for the lessee to be granted a new lease and the
lessee exercises that option, the new lease is treated as a
continuation of the old lease. In that case there is no balancing
event.
- If the lease included a building and the
lessor pays a sum to the lessee when the lease terminates in
respect of that building, the lease that was terminated is treated
as if it had come to an end by the lessee surrendering it in return
for the sum that the lessor has paid him. There is a balancing
event here.
- If another lease is granted to a different
lessee when the lease terminates and the new lessee pays a sum to
the original lessee in connection with the transaction, the two
leases are treated as if they were the same lease and as if that
lease had been assigned by the old lessee to the new lessee in
return for the sum which he received. There is also a balancing
event here.
