commercial property refurbishment licence

If you’re thinking about making alterations to your leasehold property, you should check whether you need your landlord’s consent to your works.

You should remember that (1) once your lease ends, the property will vest in the landlord, so the landlord will have a vested interest in what works you are doing and (2) if you carry out works which are unauthorised, this can be treated as a breach of the lease.

If your landlord’s consent is required, the consent itself is usually documented in a licence for alterations. A licence for alterations is a document, usually prepared by the landlord’s solicitors but at your cost. A licence for alterations can be a lengthy document and will contain legal obligations, so legal advice should be sought.

A typical licence will contain:

  • licence for alterationsa description of the works proposed – usually plans and specifications are requested by the landlord. You should ensure that the plans / specifications do represent accurately the work you will be carrying out;
  • a timescale to commence and / or complete the works – the landlord won’t want the works to take an unreasonably long length of time but any timescale should be realistic and you should get an idea of your contractor’s availability before the licence is completed. A three or six month window to start works is about right;
  • obligations before the works are carried out – the landlord will impose obligations prior to the works starting. It is common for the landlord to oblige the tenant to seek the building insurer’s consent and any local authority consents (i.e. planning permission or building regulations). Licences do sometimes specify that the landlord needs to approve the local authority consents, so bear this in mind when thinking about timescales;
  • obligations during the works – the landlord will want to ensure that the works are carried out correctly. There will usually be obligations for the works to be carried out in accordance with (1) the agreed specification / plans, (2) all relevant statutes and laws, (3) good and workmanlike procedures and (4) good building practice. Obligations can be quite lengthy, so please make sure you know what is expected;
  • obligations after the works – it is common for the landlord to require written notice of completion, as built drawings and the provision of a health and safety file;
  • a costs clause – it will be common for you to cover the landlord’s legal and surveying costs in the preparation, negotiation and completion of the licence. There may also be provisions for the recovery of costs relating to the inspecting and monitoring of the works. So that you can properly budget, you should try and seek a limit on the amount of costs to be charged. Please also remember that professional fees usually attract VAT – so again, budget accordingly;
  • an acknowledgement about future rent reviews – as a tenant you’ll want to avoid paying a higher rent on future rent review if the increase has come about due to your works. You won’t want to pay for the works then be penalised on review. You should ensure that there is an acknowledgment in the licence that any effect on the rent will be disregarded for the purposes of rent review.

It should be noted that a breach of a licence for alterations can be treated as a breach of a lease. A breach of a lease can, in severe circumstances, entitle the landlord to forfeit the lease, bringing it to an end. So while you are doing the right thing in asking for consent for your alterations – your liabilities and obligations do not stop there!

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