When taking a commercial lease there is usually a prohibition on the tenant carrying out alterations to the commercial property without the landlord’s consent.
This is because a landlord remains the ultimate owner of the property and will take back the property into their possession upon expiry of the lease (provided no subsequent/renewal lease is entered into). As such, they are likely to want to retain control over which alterations are carried out to the commercial property and the manner in which they are made during the life of any granted lease.
The points which a landlord may consider when dealing with a tenant application for their consent to proposed alterations may include:
1. Making sure the alterations do not negatively affect the value of the property (to preserve the landlord’s investment)
2. Ensuring the works are carried out to the appropriate standard and have all necessary permissions
3. Preserving the external appearance of the property, or maintaining visual unity of properties if the property is located on an industrial estate or in a parade of shops
4. Ensuring the landlord does not become liable under any legislation as a result of the works
5. Ensuring the landlord does not become liable to any third party as a result of the works
6. Ensuring the works do not alter the energy efficiency rating of the property as properties must meet a minimum rating in order to be lawfully let
Whilst internal demountable partitioning is often permitted without consent, a lease will usually stipulate that a landlord’s prior consent is required to any internal and non-structural works and alterations. More often than not, the lease will state that the landlord’s consent to internal alterations must not be unreasonably withheld or delayed – so the landlord must act reasonably when considering a request for alterations.
The landlord’s consent is typically documented in a formal document known as a Licence for Alterations.
What happens if I carry out works without a Licence for Alterations?
Whilst this may not pose an issue if the lease does not contain any prohibition or restrictions on alterations, if the Lease states that the landlord’s prior consent is required for any alterations then, without this consent, a tenant would be in breach of the covenants in their lease.
In such a situation, if a tenant carries out alterations without the prior consent of the landlord, not only can they be required to remove the alterations once the Landlord finds out, but they may also be required to reimburse the landlord for any loss (including financial) that the landlord has suffered as a result. Ultimately a tenant risks their lease being forfeited if they remain in persistent breach of covenant.
Unauthorised alterations can also prove an issue if a tenant wishes to transfer their lease, or finance the property, as they would be required to show that they had obtained the necessary consents to any alterations carried out to the commercial property.
We would recommend you always seek the assistance of a property solicitor when reviewing and negotiating a Licence for Alterations to ensure the Licence allows you to carry out your proposed works and to help avoid any overly onerous obligations (in the case of a tenant) or ensure the works are carried out to the appropriate standard in order to help avoid any inherited liabilities (in the case of a landlord).
For more advice on the topics covered by this article please contact Kerry Roshier at Herrington Carmichael at Kerry.Roshier@herrington-carmichael.com.
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