Key Takeaways
- A licence to alter is a formal legal document granting a commercial tenant permission to carry out specific works or alterations to a leased property.
- Most commercial leases require landlord consent before any alterations are made. Carrying out works without consent is a breach of the lease.
- Where consent is required, most leases provide that it can’t be unreasonably withheld or delayed.
- A landlord can impose reasonable conditions, including requiring the tenant to reinstate the property at the end of the lease.
- The licence will set out the approved scope of works, approved drawings, materials, contractor requirements and a completion deadline.
- Both parties’ legal and surveying fees are typically payable by the tenant. Costs can be significant even for smaller projects.
When a business takes on commercial premises, the space as it stands is rarely perfect. A new tenant may need to fit out the space to suit their operations. For example, installing partitions, upgrading electrical infrastructure, adding or removing walls, or fitting new air conditioning. These changes can transform a shell unit into a functional business environment.
But commercial tenants don’t generally have an automatic right to alter their landlord’s property. In almost all cases, the lease will require the tenant to obtain formal consent before carrying out any significant works. This is a document known as a licence to alter. Getting this right from the outset protects both parties and avoids disputes that can be costly and disruptive.
What Is a Licence to Alter?
A licence to alter is a formal legal agreement between a landlord and tenant that grants the tenant permission to carry out specific, agreed works to the leased premises. It records what alterations are permitted, the conditions that apply to how the works must be carried out, and what happens to those alterations at the end of the lease.
A licence to alter is different from a lease. It doesn’t create a property interest. It’s simply a consent to specific works. Once executed, it binds both parties to the agreed terms. So, the tenant can carry out the works described (and no others), subject to the conditions set out in the licence.
When Do You Need a Licence to Alter?
Whether and what type of consent is needed depends on the terms of the lease. Most commercial leases include an alterations clause that distinguishes between different types of work.
- Structural alterations: Removing load-bearing walls, altering the external fabric of the building or works affecting the building’s structure. These are usually absolutely prohibited or require landlord consent in every case.
- Non-structural alterations: Adding internal partitions, installing suspended ceilings or fitting out a unit. These typically require consent, though some leases allow minor non-structural works without consent or on prior notification only.
- Decorative works: Painting, flooring changes and similar cosmetic items. Often permitted without consent, though some leases require the tenant to use colours approved by the landlord.
The starting point is always the lease itself. If you’re unsure whether proposed works require consent, take legal advice before starting. Carrying out works without the required licence is a breach of the lease and can have serious consequences.
The Licence to Alter Process
Step 1: Prepare Your Application
The tenant or their solicitor submits a formal application to the landlord for consent. The application should include:
- A detailed description of the proposed works
- Drawings and specifications prepared by an architect or surveyor
- Information about the proposed contractor
- A method statement for how works will be carried out
- Details of any building regulations approval or planning consent required
The more information provided upfront, the smoother and faster the process tends to be. Landlords often instruct their own surveyors and solicitors to review the proposals. Remember, vague applications result in delays and additional rounds of queries.
Step 2: Landlord’s Assessment
The landlord will assess the application, often with assistance from building surveyors, structural engineers and legal advisers. They will consider:
- The structural impact of the works
- The quality of the proposed contractor
- Compliance with building regulations and planning law
- The effect on the building’s value and insurance
- Whether the works are consistent with the lease terms
If the landlord has mortgaged the property, consent from the mortgage lender may also be required. Naturally, this can add to the time and cost involved.
Step 3: Negotiating the Licence
Once the landlord is satisfied with the proposal in principle, the licence itself is drafted (usually by the landlord’s solicitors). It will set out the approved works by reference to the annexed drawings and specification, the conditions to be met, and reinstatement obligations.
The tenant’s solicitors should review the licence carefully and negotiate any terms that are unreasonable or impractical.
Step 4: Execution and Works
Once signed by both parties, the works can begin. The licence will typically specify a deadline for completion. During the works, the tenant must comply with the conditions in the licence:
- Using the approved contractor
- Meeting specified standards
- Giving access for inspection
- Not deviating from the approved drawings
Can a Landlord Refuse Consent?
Where the lease requires consent but provides that it can’t be unreasonably withheld or delayed, the landlord has limited grounds to refuse. Reasonable grounds for refusal might include:
- Genuine structural risk
- A qualified and appropriately insured contractor not being proposed
- A conflict with other obligations the landlord owes (for example, to other tenants or a mortgagee).
A landlord who unreasonably refuses or delays consent may be liable to the tenant for any resulting loss. For example, if the tenant’s fit-out is delayed and their opening date is pushed back.
Conditions a Landlord Can Impose
Even where consent can’t reasonably be refused, landlords can impose conditions. Common and reasonable conditions include:
- Requiring works to comply with all planning and building regulations requirements
- Using appropriately qualified and insured contractors
- Carrying out works to a professional standard without causing nuisance to other occupiers
- Maintaining adequate insurance during the works
- Giving notice of the start date and providing access for inspection
- Paying the landlord’s reasonable professional and legal fees
Reinstatement Obligations
One of the most commercially significant conditions in a licence to alter is the reinstatement obligation. This is a requirement for the tenant to remove the alterations and restore the property to its original condition at the end of the lease.
Whether or not reinstatement is required is a negotiating point. If the works add value to the building, a landlord may well agree to waive the reinstatement obligation. If they don’t add value or if the landlord intends to fit out differently for the next tenant, they might insist on it.
Tenants should negotiate reinstatement provisions carefully at the licence stage. A waiver of reinstatement should be expressly recorded in the licence. Without this, the tenant may face significant dilapidations liability at the end of the lease.
Costs Involved
The costs of obtaining a licence to alter are typically borne by the tenant. These include:
- The landlord’s solicitors’ fees for drafting the licence
- The landlord’s surveyor’s fees for reviewing the drawings and specification
- The landlord’s mortgagee’s fees if lender consent is required
- The tenant’s own legal and professional fees.
For complex fit-outs in large commercial buildings, these costs can reach several thousand pounds. For straightforward projects in simpler premises, the fees are usually lower. Either way, tenants should budget for these costs at the outset and factor them into the project timeline.
What Happens If You Carry Out Works Without a Licence?
Carrying out alterations without the required consent is a breach of the lease. The consequences can include the landlord seeking forfeiture of the lease, an injunction requiring the tenant to stop or undo the works and a claim for damages. Even where the landlord doesn’t act immediately, unauthorised works can cause serious problems on a dilapidations inspection or when the lease is assigned or renewed.
If works have already been carried out without consent, it might be possible to obtain retrospective consent. However, this is at the landlord’s discretion and may not always be granted.
Speak to a Commercial Property Solicitor Today
Osbourne Pinner’s commercial property team advises landlords and tenants across London and Harrow on licences to alter. We can review the alterations clause in your lease, advise on whether consent is needed, negotiate and draft the licence itself, and resolve disputes where works have been carried out without consent or where reinstatement obligations are in issue.
Please note that this article is for informational purposes only and does not constitute legal advice. We always recommend speaking to a qualified solicitor for advice tailored to your specific circumstances.
If you’re planning alterations to your commercial premises and need advice on the licence process, our property team is here to help.
We offer a free 30-minute consultation to discuss your situation. You can speak with us via video call or visit our offices in Harrow, Canary Wharf, Piccadilly Circus or Manchester. To arrange your consultation, call 0203 983 5080, email [email protected] or complete the form below.
