Licence to alter can often seem like an awful lot of trouble over what might appear to be a trivial matter. Leaseholders tend to think of themselves as home owners with the right to do what they like to their own properties, even if that’s technically not the case.
And managing agents typically have enough on their plates that they’d rather not go looking for trouble. But turning a blind eye to unlicensed works is a mistake. Potentially a very big mistake.
The whole point of licence to alter is to protect the interests of the landlord and other leaseholders, including the leaseholder undertaking the works. Naturally these interests include the integrity and value of the building as a whole as well as other properties within it that could be affected by work undertaken by a leaseholder in their own property.
For example, if a leaseholder converts a bedroom to a kitchen, this could lead to problems with water leaks and noise penetration in the corresponding bedroom in the flat below. Other alterations might simply be unsightly or even in violation of building regulations or planning laws, bringing legal liability on the landlord. And of course, any significant works can lead to accidental damage. It is always much more expensive and inconvenient to deal with such problems after the fact than to anticipate them in advance.
The process of applying for and granting licence to alter is meant to ensure no unforeseen works or damage takes place, which could result in a drop in the value of one or more properties for practical or aesthetic reasons related to the work, or have other financial implications.
In Fouladi v Darout, Mrs & Mrs El Kerrami lost a court battle with their downstairs neighbour, Ms Fouladi. In 2018, Ms Fouladi was awarded more than £100,000 in damages.
The court ruled that Mr & Mrs El Kerrami (subtenants of the leaseholder, Darout Ltd) installed a wooden floor back in 2010 without the leaseholder having obtained consent and licence to alter, causing “intolerable” noise nuisance. The wooden floor failed to meet building regulations and constituted a lease breach. A High Court appeal in 2019 ultimately failed and the El Kerramis face a legal bill in excess of £1m.
Whilst there is often legal liability on the landlord, in this particular case the High Court dismissed the claim brought by Ms Fouladi against the share-of-freehold company (St Mary Abbots Court Ltd) whose claim was actually brought against the leaseholder, their tenants (the El Kerramis) and the freeholder! Although licence to alter was agreed for the works in 2010, it did not include for the installation of a wooden floor which was done “under the radar”.
There is another “value” consideration: that of the rebuild value for insurance purposes. Substantial alterations can markedly increase the rebuild value assigned to the building, so if there are substantial unauthorised works which are not declared to the insurer, the building as a whole may be undervalued.
An undervalued building which subsequently suffers insurable damage, risks only a partial pay-out from the insurer in the event of a claim. In insurance terminology “average” will apply and leaseholders could be significant out of pocket. A reinstatement cost assessment is recommended following any significant works carried out under licence to alter.
If a leaseholder ignores the need for a licence and goes ahead with works without consent, the landlord or managing agent has a number of options.
They can simply grant a retrospective licence or accept the works with conditions or changes to the scope of works. Alternatively, they can insist that the leaseholder “undoes” the works at their own expense, or demand financial compensation. As we can see from Fouladi v Darout, the absence of a licence can cause severe repercussions for years on end, putting the managing agent, the freeholder and potentially all leaseholders under enormous pressure, all entirely avoidable.
Clearly, it is preferable to prohibit any works to be carried out “under the radar” in the first place. That means ensuring leaseholders understand their obligations and maintain good communications to prevent any unpleasant surprises. So next time you are aware unlicensed works may be proceeding, don’t turn a blind eye!
Bill Pryke is a director at Licence to Alter Ltd