By Claire Miller, Partner, Head of Property, Penman Sedgwick LLP
Most commercial leases will contain provisions that control or restrict the tenant’s ability to carry out alterations to the premises demised to the tenant by the lease.
If you are a landlord: take care to include provisions in the lease to protect the value of your reversionary interest in the premises, and to enable you to prevent alterations being carried out that might make it difficult to let the property in the future.
If you are a tenant: ensure that your lease contains provisions that give you the ability to configure the premises to suit your needs, and those of any potential assignee or subtenant in the future.
If works are proposed or required, both parties will need to consider a number of issues, including:
- Do the works go beyond the boundaries of the demised premises? A common example is where the premises are part of a larger building, and the tenant is proposing to install air conditioning plant and equipment serving the demised premises: the works required are likely to include externally mounted plant and equipment which may therefore involve works outside the demised premises.
- Are the works “improvements”? If they are, the tenant may be able to carry them out even if they are not permitted by the lease.
- Is the landlord’s consent required, and if so, does the landlord have absolute discretion or should consent not be unreasonably withheld?
- Is the tenant in breach of any other obligations in the lease? If so, the landlord should take care that in granting consent to alterations the landlord does not impliedly waive that breach.
- Are there rent review provisions in the lease? If so, how do these deal with the effect of alterations on the rent and what provisions might be required in the licence for alterations?
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