Definition Of Reversionary Lease In Real Estate

Definition of "Reversionary lease"

The Thompson Team, Real Estate Agent BerkshireHathaway HomeServices

The reversionary lease definition is a lease that only starts at a later date. It is not a lease that starts only when another current lease ends. That is a lease of reversion. Not to be confused.

It is often used when the occupancy of a property is postponed for a future date. It can easily be used if, for example, a renter of a particular space runs a business there. The business is profitable and the owner of the space is happy because he has a stable tenant. In this case, a reversionary lease can be drafted to start at the end of the current lease. The lease is done between the same entities just for a different timeline.

A reversionary lease in real estate will also avoid the troubles that an extension of the current lease might bring. An extension on a current lease brings with it taxes, having to register the land as well as other results.

With a reversionary lease in place, if the lease ends at an inconvenient time and both parties want to continue the contract, the change will go by smoothly and both parties are free to go about their own business interests.