What is it: A Side Letter

What is a Side Letter?

A side letter is a short, separate legal document that supplements, clarifies, or amends a specific aspect of an existing contract. It does not replace the main agreement but instead sits alongside it. Importantly, a side letter is legally binding. It is not simply an informal note or a casual exchange of correspondence. When properly drafted, it carries the same legal force as the principal contract. The original agreement remains fully in effect, with the side letter operating as an update to address a specific issue without altering the contract as a whole.

When is a Side Letter used?

A side letter is commonly used where parties agree a change after the signing of the original document and don’t want to redo the original for the sake of a single or few minor points. A side letter can deal with a change quickly.

It can be used where a party doesn’t want certain details written into the main contract, usually for confidentiality or commercial sensitivity. Another common use is to rectify an error or ambiguity after the signing, avoiding the need to rewrite the entire document. Side letters can also be used by some landlord’s to agree alternative terms with a tenant which they do not wanted reflected in the main document, for example where they have a standard form lease but wish to deviate from its terms in a specific transaction, such as varying rent payment dates, granting rent free periods or agreeing rent suspensions.

By setting certain details out in a separate document, the parties can avoid the time and complexity of redrafting the main contract, while ensuring the agreed terms are still legally binding and enforceable.

Side letters are usually personal to the parties entering into them and do not tend to bind successors in title unless they are drafted specifically to do so.

What does a Side Letter cost?

The cost of a side letter can range depending on the complexity of the changes, the level of negotiation required, and the amount of legal input involved. Straightforward side letters dealing with minor adjustments or clarifications tend to sit at the lower end of the range, while more detailed or negotiated arrangements will increase the cost. Overall, side letters can provide a practical and cost-effective way to record agreed changes without the need to revisit or rewrite the entire agreement.

Does a Side Letter need to be Registered?

A side letter will not usually need to be registered as it tends to be personal between the parties. That said, there are some exceptions to this rule and legal advice should be taken as to whether a side letter needs to be registered.

For example, changes to rent, the length of the term, or rights over the property can carry legal consequences beyond a simple private arrangement. For this reason, in property matters it is important to carefully consider whether a side letter is the appropriate document given the changes being implemented, or whether a formal deed of variation would provide greater legal certainty and protection. You will also need to consider other implications such as the affect on SDLT if, for example in a lease scenario, the rent is changed.

If you require assistance with varying the terms of a contract or lease, please contact our Real Estate Team who would be happy to help guide you through the process.

This article is part of our “What Is It” series where we consider various property documentation and explain what it is and when it is used, find more in the series here.