Table of Contents
In Short
- A licence to alter is a legal document allowing tenants to modify leased property, typically for business needs like structural changes or fit-outs.
- Tenants must obtain consent for significant alterations, with landlords concerned about property value and marketability.
- Tenants need to assess costs, disruptions, and compliance with lease terms and legal requirements, including reinstatement obligations.
Tips for Businesses
Before making any alterations, ensure your lease outlines the process for obtaining a licence to alter. Clearly define the scope of work and document all changes to avoid disputes later. Communicate effectively with your landlord and seek professional legal advice to navigate the complexities of alterations and avoid costly errors.
Businesses looking to take on commercial leases often need to modify the existing decor or layout of the property, particularly where such companies are providing client-facing services. Landlords should consider potential tenants’ pre-planned fit-out plans or improvements before finalising leasing agreements. This article explores the key considerations surrounding licences to alter, explaining their importance and the various factors that landlords and tenants must consider.
What is a Licence to Alter?
Forms of Licence to Alter
A licence to alter is a document ancillary to the lease and governs the process of changing leased properties. Depending on the types of changes the tenant plans, they can take different forms, affecting their legal implications and enforceability. For minor changes, a letter of consent from the landlord may be enough to satisfy the lease requirements.
On the other hand, a more formal licence to alter will typically be sought out for more significant or structural changes and is issued as a longer-form document and executed as a deed. It is always essential to check what the lease says about how consents or approvals under the lease can be made. If the lease says that alterations can only be ‘approved’ by deed, then the consent should be executed as a deed.
Use of Licence to Alter
The lease will govern whether landlord consent is required for alterations, which may vary depending on the type of work. For example, installing a demountable internal partition is often permitted without seeking formal consent.
The licence to alter is used when permission is required to make specific changes to a property. It will set out the conditions under which the alterations can be made and is required before any work starts. The primary purpose of this document is to protect the interests of both the landlord and the tenant, ensuring that any changes to the property are compliant with legal requirements and carried out appropriately.
Key Points
One of the most critical aspects of a licence to alter is the scope of alterations. The licence must clearly state the changes permitted. It should include detailed plans and drawings, specifications for materials, a timeline for completion, and any restrictions or limitations on the work. Precision in this area is crucial to avoid misunderstandings or disputes between the parties involved at a later stage.
Landlords’ Consideration
Property Value and Future Marketability
Common alterations in commercial properties often include structural changes such as displacing external or load-bearing walls, flooring modifications, windows replacement, property extensions, and relocating facilities such as those related to the provision of utilities. These changes will require the landlord’s consent under the lease and can significantly affect the property’s current value or insurance requirements.
Often, tenants will take over old properties and make significant improvements, but they still need to seek consent. A tenant’s modifications to fit their business needs can also impact the landlord’s ability to find suitable tenants following the expiration of the lease. To mitigate this, most licences to alter (and leases) will oblige the tenant to remove the alterations and reinstate the premises ready for re-letting.
Quality of Alterations
There may be provisions in the lease or licence to alter that require the tenant to carry out these works with good workmanship and using a certain quality of materials. The landlord wants to preserve the integrity of their property and limit the effect of works on its energy efficiency.
Surveyors may become involved to review the plans’ accuracy and the suitability of the tenant’s planned alterations. These documents should also consider any disruption to other tenants.
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Tenants’ Considerations
Effect on the Tenancy
Tenants’ primary concerns are the cost of alterations and the potential for rent increases. They must also consider business disruption during the works, compliance with lease terms and statutory requirements, obtaining necessary permits and approvals, insurance requirements during and after alterations, and the potential impact on dilapidation liability at the end of the lease.
Complying With Regulations and Lease Provisions
A critical aspect of any licence to alter includes obtaining planning permission, building regulations approval, and addressing health and safety considerations. Reinstatement obligations at the end of the lease term are also an important consideration.
Avoiding Disputes
The process of obtaining a licence to alter involves specific timeframes and procedures. Disputes can arise concerning licences to alter. For example, due to discrepancies in the scope of work or quality of the alterations.
Clear communication between landlord and tenant is crucial in preventing and resolving such disputes. In some cases, independent surveyors may play a role in the resolution. Both parties should be aware of potential legal remedies and the consequences of breaches.
If you are moving out of your leased space and assigning the lease to another party, you are required to notify your landlord and obtain their consent. Use this free proforma template for this purpose.
Key Takeaways
In conclusion, a licence to alter is a vital document in commercial leasing that protects both landlord and tenant interests. It requires careful consideration of legal, financial, and practical aspects to ensure proper execution of premises modifications and maintain a positive landlord-tenant relationship. By addressing all these factors comprehensively, both parties can navigate the process of property alterations smoothly.
If you need help with your property plans, 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. Call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
Freeholders can only refuse to give a licence to alter for a legitimate reason. So they should avoid unreasonably withholding consent. Reasons can include the work decreasing the property value or weakening the building’s structure.
Yes, a licence to alter is a formal, legal document. It sets out the conditions for the work to avoid any negative consequences.
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