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Altering leased premises

03 January 2008 by
Altering leased premises

Read your lease carefully before carrying out alterations to your premises, advises property solicitor Simon Williams, a partner at Boodle Hatfield

The problem

I started to refurbish my restaurant last summer but I did not inform my landlord of the works beforehand and now I am being threatened with legal action. What should I do?

The law

This will depend on how the lease is worded. Most leases contain provisions governing what alterations a tenant can carry out. Some might be absolutely prohibited, while others might require landlord's consent first. It is common for structural alterations to be prohibited but for all other alterations to be permitted with landlord's consent.

If the landlord's consent is required, then it is usual for the lease to say that this consent cannot be unreasonably withheld. However, in the absence of this, the Landlord and Tenant Act 1927 provides that where tenant alterations are "improvements" then, provided the lease permits them with landlord's consent, the landlord must act reasonably in giving that consent. Whether or not something is an "improvement" is viewed from the tenant's perspective.

You will also need to check very carefully how the property is described in the lease. Sometimes this is straightforward and comprises the whole of a single building, but in other cases the property might be part only of a larger building. Here it is quite common for the lease to exclude all structural and exterior parts of the building. The structural walls themselves are not included in the lease and, accordingly, the tenant must not make any alterations to them.

Expert advice

Contact the landlord as soon as possible in order to seek a formal consent to the works. If the landlord gives consent, then this will usually be documented in a licence for alterations. This will cover matters such as how the alterations are to be carried out and whether or not the alterations have to be removed once the lease comes to an end, such that the property is returned to the landlord in the same state it was in when the lease was first entered into.

You will have to pay the landlord's costs. These will include the legal fees incurred in preparing the licence and surveying fees incurred in approving the alterations and possibly monitoring or supervising the works. Such a licence can be entered into retrospectively, so this can cover the works that might already have been carried out.

If the landlord refuses to give consent to the alterations, and the lease contained an absolute prohibition against that type of alteration, or the landlord is acting reasonably in refusing to consent to the alterations, then you will be faced with no alternative but to stop the works and return the property to the state it was in before you started the works.

If the landlord unreasonably refuses to give consent to the alterations in circumstances where he is obliged to act reasonably, then you might need to go to court to obtain an order permitting you to carry out the alterations, particularly if you wish to either sell or mortgage the property or if your existing mortgage requires you to do so.

Check list

Read your lease to check:

  • The extent of the property in the lease.
  • What alterations are absolutely prohibited.
  • What alterations require landlord's consent.

Beware!

If you commence alterations without landlord's consent where required, then this will place you in breach of the terms of your lease. This will give the landlord a right to claim damages for any loss it suffers because of your breach. In extreme circumstances, the landlord might succeed in forfeiting your lease, meaning the lease is brought to an immediate end. The landlord can then claim damages for any loss it suffers, which could include lost rent and the costs incurred in finding another tenant.

Contact

Simon Williams, partner in commercial property, Boodle Hatfield
swilliams@boodlehatfield.com
www.boodlehatfield.com

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