Can A Tenant Make Alterations To A Commercial Property?
When it comes to alterations, commercial property landlords have to balance being flexible enough to allow their tenants to make the changes required to operate their business and protecting the value of the premises by preventing (permanent) alterations that would make it difficult to re-let the property .
How can landlords control the type of alterations a commercial property tenant can make?
As a commercial property landlord, one way you can limit the extent of a tenant’s alterations is to provide a clause in the lease permitting non-structural alterations to the interior only and stating that permission must be sought before any work commences.
Can a landlord refuse permission for commercial property alterations?
The Landlord and Tenant Act 1927 states that permission for commercial property alterations that can be deemed an ‘improvement’ cannot be unreasonably withheld. It is important to note that case law states that the issue of whether an alteration is an improvement is judged from the tenant’s perspective, therefore, most alterations will be deemed as such. It is irrelevant whether an alteration adds to the letting value of the property.
Case law regarding what constitutes reasonable withholding of consent is scant. However, the Court of Appeal in Iqbal v Thakrar [2004] EWCA Civ 592 set out the following principles:
- Consent is designed to prevent the tenant from carrying out alterations that damage the landlord’s property interests.
- A landlord cannot refuse consent on grounds that have nothing to do with their property interests.
- The burden for showing consent has been unreasonably withheld is on the tenant.
- The tenant must make their alteration proposal clear so the landlord has sufficient information available on which to judge if consent should be given or withheld.
- Landlords do not have to prove their refusal to consent was justified, provided that their conclusion was one that might be reached by a reasonable landlord under similar circumstances.
- It may be reasonable for the landlord to refuse consent to a proposed alteration or addition even if it is not forbidden by the lease. But whether such refusal is reasonable or unreasonable depends on all the circumstances.
- Although a landlord normally only has to consider their own interests, there are circumstances where, given regards to both the landlord’s and tenant’s interests, it would be unreasonable to withhold consent.
- Consent cannot be refused on grounds of economic loss alone. The proper course for the landlord to adopt in such circumstances is to ask for a compensatory payment.
Wrapping up
Issues around granting or refusing consent for commercial property alterations can be complex, especially if there are also considerations around assigning or underletting and/or changing the use of the premises. It is therefore particularly important for landlords to seek legal advice from an experienced commercial property law solicitor before making any decisions regarding a tenant’s alteration or improvement request.
If you require advice and representation on any commercial property matter, please call us on 02476 231000 or email enquiries@askewslegal.co.
