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When a commercial landlord and tenant enter into a commercial lease, it is the tenant’s responsibility to check the property is suitable for their business. Such due diligence might include inspecting the location and size of the premises. There are also legal restrictions on how a tenant can use the property, such as whether they can operate a retail store, hospitality venue or office. This is known as the building’s usage, and there will often be a usage term in the lease agreement. There are legal implications if parties want to change the use of any commercial property. This article will explain the legal consequences.
This cheat sheet outlines what you should be aware of in your lease agreement.
What Does Property Usage Mean?
A tenant cannot operate any kind of commercial activity they would like once signing the lease agreement. A commercial lease often states how a tenant can use the premises within its usage terms. These terms explain what business activities are appropriate and legal to operate on a specific property.
For example, a commercial property may be appropriate to run a:
- shop;
- restaurant;
- warehouse;
- office; or
- hotel.
The lease agreement will also specify when the tenant needs permission from the landlord to alter the usage terms of the lease. Accordingly, a landlord has the legal right to refuse consent unless the lease states otherwise. For example, a lease might state that the landlord cannot unreasonably withhold consent to a change of use.
No matter the business activities a commercial lease allows a tenant to carry out, such activity must be lawful. Lawful activity will depend on the property’s planning system. Under the planning system, each business will fit into a specific ‘use class’, which is a category of type of building. For example:
- A1 for shops;
- A2 for professional services;
- A3 for food and drink;
- A4 for public houses;
- B1 for offices;
- B2 for general industry; and
- B4 for particular industrial use.
Can I Change a Property’s Use Class?
Different reasons can arise which lead a landlord to change the use of their commercial property. For example:
- a prospective tenant wishes to sign a lease to carry out a different business activity; or
- the current commercial tenant wants to change their business activity.
Where you need to alter the property’s use class, legal implications will arise. Even if both the landlord and tenant consent, additional approval may be required, such as by the local council.
Further, if the property is part of a listed building, there are restrictions with its change of use.
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What Permission Do I Need?
The government’s planning portal lists the different use classes of buildings. However, changes may have occurred over time, so a landlord will also need to look at the following:
- the property’s records;
- any deeds;
- Land Registry records; and
- any other relevant official documents.
How Do I Request Permission?
To request permission to change of use of a commercial property, a landlord must contact the Local Authority of the commercial property. It can take approximately 12 weeks to receive a decision.
Your application should contain as much detail as possible, including research on the impact of the change of use of the commercial property. For example, consider:
- the local environment, such as traffic;
- access to delivery vehicles; and
- the need for parking spaces.
Depending on the extent of the change of use, a landlord may also need to consider the legal implications of building regulations. Their property must comply with these, which include:
- the need for fire doors;
- any flame-retardant building materials; and
- energy efficient lighting.
If commercial use changes to a business activity where food preparation takes place, the property must comply with hygiene regulations.
Key Takeaways
Changing how a tenant uses a commercial property will give rise to some legal implications. A tenant will need the landlord’s consent and possibly additional consent from the local authority’s planning department. Also, if changes affect building regulations or other laws such as health and safety, the change of use must comply with these legal implications.
For more information on the legal implications of changing the use of your commercial property, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Tenants cannot simply operate any activity they want once they sign the lease. The use class of a building will regulate what commercial activities can legally take place on the property, such as a retail store, hospitality venue, or office. A current or potential tenant may operate a business incompatible with the property’s current use class. In that case, a landlord will need to consent to changing a property’s use class.
One legal implication of a change in the use of commercial property is that you may need to get the permission of the local authority.
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