A landlord's guide to tenant alterations
A landlord who lets property to a tenant will want to know that they will get the property back at the end of the lease in a fit state to quickly re-let. Controlling the tenant’s right to make alterations is a key aspect of this. As Louis Mathers, commercial property expert with Parnall’s Solicitors explains, landlords need to understand their rights and obligations and make sure tenant alterations are properly documented.
‘A commercial tenant will want the ability to adapt a property to fit the needs of their business and these may change over time’, says Louis ‘but that does not mean that a tenant should be given a free rein. Restrictions need to be put in place to ensure that a property is not altered in a way that has an adverse effect on a building’s structure or on its energy efficiency, and you do not want to get back a building that is laid out in a way no other tenant will want.’
Alterations clause in the lease
The alterations clause in the lease will set out what the tenant can and cannot do, and on what basis. A typical clause will prohibit some types of alterations altogether, for example structural changes or work that alters the external appearance of a building. It is also now common for leases to prohibit alterations that adversely affect the building’s energy performance rating. This is likely to become more commonplace with the new restrictions contained in the minimum energy efficiency standards, introduced with effect from 1 April 2018, and which will in most cases prevent a property being let out where its energy efficiency rating is allowed to fall to below E.
Other types of work will usually be allowed with the landlord’s consent, including internal, non-structural alterations that the tenant may want to make to enable the tenant’s business to function and to create the right atmosphere.
‘The issue to look out for when it comes to tenant alterations based on landlord’s consent is the possibility of the alteration amounting to an improvement’, explains Louis, because in these circumstances you may be subject to a legal obligation not to withhold consent unreasonably and in certain circumstances may be forced to allow the works to be carried out, even where the lease says they are prohibited.’
Alterations which amount to an improvement
Whether an alteration amounts to an improvement is a question of fact, but broadly speaking any alteration which improves the value of the property from the tenant’s perspective is in theory at least capable of amounting to an improvement.
The consequence where proposed works will be an improvement depends on whether the tenant seeks consent under the terms of the lease or takes advantage of a separate statutory process, and how you and the tenant decide to deal with the issue.
If the lease says the tenant can carry out alterations with your consent, you will be under an obligation not to refuse consent to an improvement unreasonably. You will be able to insist that certain fees and expenses are paid; that a charge can be made for any damage or diminution in value caused; and, in most cases, that the premises must be reinstated at the end of the lease term. If the tenant is paying for the works, the costs of them will usually be ignored when settling the new rent.
If the lease says that no alterations are allowed, the tenant may still notify you of their intention to carry out improvement works. If the works will increase the letting value of the property, the tenant could get a court order which could enable them to go ahead with the works against your wishes. If you do not object, you can choose to carry out the works yourself and charge the tenant an increased rent. Where the works are carried out by the tenant, you may become obliged to pay compensation to them at the end of the lease.
‘Landlords can get caught out here’ explains Louis ‘because the tenant’s initial notice does not have be in any particular form and may just be given by way of a letter. This is why it is always advisable to speak to your solicitor when a request to carry out alterations or improvements is received.’
The importance of documentation
If you agree to alterations or improvements being carried out, it is important to document this in a formal written licence which should include:
• a detailed description of the work, including plans and specifications;
• any conditions about how the work is to be carried out;
• a statement about how the alterations will be treated on rent review; and
• a statement about whether the tenant must remove the alterations at the end of the lease.
Your priority will be to get the property back in a lettable state and you need to take steps when you are negotiating consent for the works to ensure that this is achieved.
For further advice about tenant alterations and improvements, please contact Louis Mathers on 01566 772375 or email email@example.com
Has your personal information been shared without your permission?
Planning your escape to the country, what you need to consider – part 2
Government consultation on new national model for shared ownership
Choosing a partnership structure
Planning for what happens when you die by Deborah Adams
Changes to legislation could offer protection for tenants in the private rental sector
Move to the country - Part One
The risks of DIY probate
Will your septic tank still be legal in January?
The death knell for ‘kiss and tell’?
Making a will when you retire
Selling your property at auction
Not looking so good - your guide to compensation for botched non-surgical cosmetic procedures
New threshold of seriousness in defamation proceedings
Legal considerations when building a granny annex
Choosing the right person for your power of attorney
Formal Interviews - Do you need legal representation?
Privacy rights and aerial images
Trustees’ duty to give information to beneficiaries
Five problems with a leasehold property
Taking your first commercial lease
Is your organisation protected from employee social media legal risk?
Have you been targeted by negative social media posts?
Farmers be alert when being inspected
Help for House Sellers?
Don’t let your digital assets end up in a digital grave
Valuing an estate for probate
Development proposals and your local authority search
What can you do if your child is injured in a serious accident
NetRights welcomes new protection for social media users
SHOULD I GET A LAWYER FOR A SPEEDING OFFENCE?
Supreme Court recognises that social media is a “casual medium” in libel battle
Choosing the best conveyancer who is right for you
Making a will after a second or subsequent marriage
Option or promotion agreement – which is best for landowners?
Anonymous pub and restaurant online reviews leave a bad taste
Have you had an accident involving a horse?
Help to Buy – beware of some cracks in the structure
Understanding Lasting Powers of Attorney
Changes to Energy Performance Certificate for Landlords
Had a cycling accident? Your route to obtaining compensation
New year, new home: tips to sell your home in the New Year
Tax Planning for your inheritance
Hearing loss: when your employer may be liable
Buying a home for your retirement, five things you need to consider
Farmers plan to diversify after Brexit
Ministers press ahead with probate fee shake-up - reports BBC News
Botched dental treatment? You may be entitled to compensation
Why a Health and Welfare Power of Attorney is a good idea
Will the new charge on building developments in Cornwall affect you?
Energy Performance Certificates – Do They Matter?
HMRC Challenging Stamp Duty Land Tax Payments
Ben Mitchell qualifies as a solicitor
The potential implications of Brexit on employment law
Appointing a guardian for your children
Houses in multiple occupation – new rules from October 2018
New Agriculture Bill published
Will Brexit affect my pension?
Dreaming of a holiday home? Sort out the legals before putting your feet up
Lasting Power of Attorney by Deborah Adams
Settled status after Brexit by Alexis Hager
How to choose an executor to administer your estate when you die
How overage agreements can boost profits from your land
Top tips for first-time buyers
How Could Brexit Affect My Farm?
Wills & Succession in Spain by Deborah Adams
Brexit – an international and local view by Alexis Hager, Litigation
Capital gains tax - important facts for non-residents of the UK
Buying a home: the importance of making sure the seller is entitled to sell
Changing a will after someone has died: it is possible and it could save you money
Your responsibilities when you have people working in your home
Sad passing of Battle of Britain pilot who served with Parnall family member
Considerations when buying a heritage property
Disciplinary proceedings at work: guide for employers
Employers should have a disciplinary process in place, but just following this may not be enough to avoid falling foul of the law and exposing yourself to the risk of an employment tribunal claim.