To ensure the evolving needs of your business are met, we understand that you may require alterations to your commercial property.
You should note there may be restrictions as to permitted alterations within your commercial lease.
Prohibited alterations:
You should note that typical restrictions within a commercial lease are that alterations to both the structure and exterior of the property are prohibited. It is also unlikely that you can make any alterations to any service media at the property; this could include pipes and the electricity supply, for example.
Permitted alterations:
There may be scope to make non-structural alterations to the interior of the property with the landlord’s consent.
The landlord may have imposed certain restrictions on how the works are to be carried out. This could include a requirement to use good quality materials and to carry out the works in a good and workmanlike manner. A further point of consideration is usually the requirement for the works to be completed to the reasonable satisfaction of the landlord.
If your lease is silent on alterations and the relevant restrictions, this could mean that alterations are permitted. It is important to seek advice on this point to ensure you do not inadvertently breach your lease.
Ancillary clauses:
There could be additional clauses within your lease which are relevant to alterations. A number of examples could include:
- A restriction on signage at the property;
- A requirement on you to yield up and reinstate the property with all alterations removed. This is usual, and will involve additional expense for you at the end of the term;
- A requirement on you to comply with laws which could include planning permission, building regulations and fire safety;
- A requirement on you to use the property in a certain manner; for example, a restriction not to overload part of the property;
- A requirement on you to comply with any requirements and recommendations of the insurers that relate to the premises.
A commercial lease should usually also state that any alterations you make to the property are disregarded when assessing the review rent under any open market rent review under the lease.
Mitigating risk:
If consent is necessary under your lease, the parties should document any proposed alterations in a document known as a “licence for alterations”. The licence is the landlord’s consent for the tenant to carry out works to the property. The landlord will usually require the tenant to be responsible for its legal costs in connection with the licence for alterations, and any surveyors’ costs in approving the alterations.
The landlord may ask the tenant to provide plans of any proposed alterations as this could be required for insurance purposes.
Even if consent is not necessary, it is good practice to obtain confirmation in writing from the landlord the proposed alterations are agreed. You should still notify the landlord the works have been carried out.
You should also obtain advice to determine whether any planning consent or any building regulations approval are necessary for your proposed alterations. You should also consult with a surveyor when making any alterations to the property.
It is advisable to seek independent legal advice at an early stage. This applies to both before the lease has been entered into, and secondly, advice should also be sought if you wish to make alterations during the lease term.
Potential consequences:
If you do not obtain landlord’s consent when required for the proposed alterations, this could carry a level of risk to you.
A non-exhaustive list of consequences are as follows:-
- You run the risk of the lease being forfeited which means your lease could end abruptly;
- Your breach could be a ground for your landlord to refuse a renewal if your lease is protected under the Landlord and Tenant Act 1954;
- Your landlord could refuse their consent if you wish to assign your commercial lease.
If you carry out prohibited alterations, this is likely to be a breach of covenant. There is often a clause within a commercial lease for the tenant to be responsible for the landlord’s costs. This is likely to extend to costs, expenses (solicitor or other costs), claims, damages and losses in connection with any breach of covenant under your lease.
You may wish to familiarise yourself with the numbered points above at 2 and 3 in the article ‘Points of Consideration When Acquiring a Commercial Lease’ for further guidance.
If you would like to speak with a member of our Commercial Real Estate team, please do get in touch.
The information provided in this article is provided for general information purposes only, and does not provide definitive advice. It does not amount to legal or other professional advice and so you should not rely on any information contained here as if it were such advice.
Wright Hassall does not accept any responsibility for any loss which may arise from reliance on any information published here. Definitive advice can only be given with full knowledge of all relevant facts. If you need such advice please contact a member of our professional staff.
The information published across our Knowledge Base is correct at the time of going to press.
