Much like wanting to make changes to your home after having lived in it for a while and figuring out what works, commercial tenants will often want to make changes to the premises they occupy throughout the term of their lease to adapt how they utilise their space.
This could range from something seemingly as simple as reconfiguring the layout or could involve more structural changes which may have an impact on other parts of the building, perhaps occupied by other tenants.
Whatever the works, tenants must consider whether or not landlord consent is required under their lease. Very few leases are exactly the same, so while there is no one set position, some generally applicable considerations are set out below.
Application for consent
Sometimes tenants will be allowed to carry out certain internal alterations to their premises, as long as they are not structural in nature and do not affect any other parts of the property. If that is the case, leases might still require that certain information (plans, any permissions required, and so on) be provided to the landlord on completion of the works.
Beyond that, commercial leases usually specify that any alterations or improvements cannot be carried out without prior written landlord consent, with such consent not to be unreasonably delayed or withheld. Although there is no fixed period that will constitute an unreasonable delay, consideration will be given to how long the landlord takes to acknowledge and action the application and the level of assessment that will need to be carried out to approve the works, in other words the level of detail in which the landlord might need to have their own professionals review and comment on the proposals.
A lease might specify exactly what needs to be provided with any written request for landlord consent. Even if it doesn't, in order to ease the process, a well prepared application for consent should provide all relevant drawings, specifications of products and materials to be used and plans for how the works will be done should be provided to the landlord. Otherwise, consent may be held up if a landlord has to keep asking for additional information to consider the application.
Any consent that is given may also be conditional – the landlord might require certain undertakings in respect of how the works will be executed and in relation to reinstatement of the property on completion. It can also be expected that landlords will require their tenant to meet their reasonable costs incurred in relation to the application for consent, including professional fees and outlays involved in reviewing and documenting the consent in a separate licence for works.
Tenants should therefore always review their lease in detail to ensure they know what will be required in order to carry out any alterations in accordance with the lease terms.
Removal at expiry
Looking beyond the approval process - commercial leases will also often require the tenant to remove any alterations at lease expiry and to reinstate the premises to the condition it was in prior to alteration.
Some leases might require the landlord to serve prior notice of any alterations they wish to be reinstated and fix a set timeframe for the landlord to do so. We also sometimes see a requirement for a tenant to be proactive – some leases require tenants to write to their landlord a number of months before lease expiry to ask the landlord what alterations they want removed, with an accompanying obligation on the landlord to respond within a specified period. If that isn't done, it might affect parties removal and reinstatement obligations.
Tenants should look out for this and ensure they are reviewing their leases well enough in advance of lease expiry so any requirements to seek confirmation from the landlord on what alterations need to be removed are complied with. If a tenant fails to seek confirmation (when its required by the lease), they may be faced with a schedule of dilapidations that calls for full removal and reinstatement of alterations that could have been negotiated with the landlord in advance.
Early engagement with landlords will also provide tenants with a level of certainty on what reinstatement works may be required. That will allow preparations to be made which will provide tenants with a greater level of control than sitting back and waiting to see if a landlord is going to serve a schedule of dilapidations, the costs of which may not have been fully accounted for.
If you are an occupier considering alterations to your leased premises, please do not hesitate to get in touch with our Real Estate and Litigation teams or your usual Brodies' contact.
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