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Licence for Alterations – a practical guide for landlords

Posted
January 28, 2015
Commercial Property

Minesh Patel 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, and or to comply with current legal or regulatory requirements. 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 with your solicitor whether or not the tenant will be entitled to compensation at the end of the lease for any improvements made. 

 • 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 (and where appropriate, licensing) 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? 

• If you have been asked to contribute to the cost of any plant, machinery, fixtures fittings or other integral features comprised in the works, it is vital you get your solicitors and accountants advice early on the ownership of any such items purchased, and the tax treatment of the contribution, especially any available capital allowances. 

• 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. It is important that you instruct solicitors at the outset to deal with the issues detailed above. stevensdrake regularly assist landlords in the preparation and completion of Licence for Alterations.

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