It is very rare for a business to locate a property that is perfectly fitted out and equipped, ready for them to move in and operate their business. If the building is to be owner occupied then subject to any statutory consents that may be needed, the occupier has free rein to carry out works and alterations. However this is not the case with a rented property. In these cases any works will be controlled by the landlord owner through provisions in the lease.
If a tenant wishes to carry out any works to a rented property there are a number of steps that have to be taken before works can start. Once a tenant decides they want to carry out alterations to a property, and what those alterations will be, then the next step should be to consult the alteration provisions in the lease. Are the particular works prohibited under the lease, or do they require the landlord’s consent? What conditions are included in the lease relating to alterations? Is planning permission required? Is landlord’s consent required for a planning application?
To start the ball rolling in obtaining the landlord’s consent, detailed plans and a specification setting out as much detail as possible about the works should be drawn up and a formal request made to the landlord for consent. The landlord will expect that the tenant will pay all of their professional fees. It may therefore be advisable to obtain consent to any proposed works when going through the lease negotiation process as often the landlord’s costs are rolled up with the cost of granting the lease. It also means fit out works can be carried out on taking up occupation of the property. A tenant may also consider requesting a rent free period from their landlord to cover the fit out period. The landlord does not have to agree to this but if they are keen to have the tenant may be amenable to the request.
A tenant can only alter the property as described in the lease. For instance if the property is the internal areas only, a tenant can not carry out works to the structure or exterior. By way of example, should the tenant wish to install an air conditioning unit, this would involve punching a hole through the exterior wall and installing apparatus on the roof - the wall and roof are not part of the ‘property’. Similarly, drilling into the main structure to bolt equipment to the floor of a property may also mean alterations to parts of the building that are not part of the ‘property’ in the lease. Is the floor part of the ‘property’? Where the lease prohibits works to the exterior or structure of a building and the tenant wants to carry out works to these areas, then landlord’s consent will always be required but the landlord can exercise complete discretion in granting consent.
When considering whether to consent to tenant works the landlord’s main concerns are to ensure the reversionary value of the building is protected and to prevent alterations being carried out that may make the property difficult to let at the end of the term or lower the rental yield. A landlord will want to ensure that any works carried out by a tenant is documented in a licence to alter which forms a record of the works carried out, particularly at the end of the term when dilapidations and reinstatement become considerations.
As a tenant considering alterations, it would also be advisable to consider the clauses in the lease dealing with planning permission and user. Certain works may require planning consent which in turn may require the separate consent of the landlord. Consent to carry out works is not the same as consent to apply for planning permission for such works. The user clause in a lease may also contain certain restrictions to prevent damage to the property, such as load restrictions on the structure of the building which may prevent certain alterations.
Alterations to a rented building need careful consideration and landlord’s consent may not always be forthcoming. Alterations and the need for consent should be considered in the early stages of taking on new property under a lease.
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