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Licence for alterations - a practical guide for landlords

Posted
June 11, 2010
Commercial Property

Matt Grindley of stevensdrake provides a checklist for Landlord's to consider when dealing with applications relating to consent for alterations. It is standard practice for landlords and tenants to enter into a 'Licence for Alterations' where a tenant wishes to carry out improvements or other major works to its premises during the term of its lease. Whilst structural alterations are usually prohibited, non-structural alterations are normally acceptable, subject to the tenant obtaining Landlord's consent. Landlords need to treat applications for consent seriously to ensure that any alterations do not have a negative impact on the value of their reversionary interest, the safety of the building and the marketability of the premises once altered. These concerns need to be balanced against the tenant's investment in improving the property to provide a more efficient and attractive place to work or trade. Landlord's checklist:

  • Ensure that the tenant provides you with full and clear details and a specification of the works that it intends to carry out.
  • Obtain advice from your surveyor as to how the works will affect adjoining premises, other parts of the building and the marketability of your investment/future lettings. Experience tells us that there may be issues with access, damage and inconvenience to adjoining premises.
  • Check the tenant has obtained any necessary planning permission, building regulation approvals or other statutory consents (e.g. The Disability Discrimination Act 1995). Under the terms of the lease, your consent may also be required to any planning applications that the tenant makes.
  • Consider any requirements of your insurer in connection with the works.
  • Do you require the tenant to reinstate the premises at the end of the term? In most cases, a tenant will have carried out alterations which are specific to its own commercial needs. Will those alterations impact on your ability to re-let the premises should you have to repossess?
  • Document how the alterations are to be treated on a rent review. Are they to be disregarded?
  • Include provisions in the Licence for Alterations for inspecting the works and provisions as to how the works are to be carried out/reinstated. You may want to retain some control over the quality of workmanship/materials used and timescales.
  • In most cases the tenant will be responsible for the landlord's costs in connection with the Licence for Alterations. It will be for your solicitor to obtain the required undertaking from the tenant's solicitor.
  • Published - June 2010This article is provided for general information only. Please do not make any decision on the basis of this article alone without taking specific advice from us. stevensdrake will only be responsible for the advice we give which is specific to you.

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