WHAT IS LICENCE?
Under most residential leases a tenant is required to obtain consent from the landlord and/or the management company before making any alterations to his/her property. It's a simple process which is also known as “An Application for a Licence for Alterations”.
Whether or not consent (a licence to alter) is required will be determined by (i) the scope of works and (ii) what the lease says.
In most leases, the landlord will place a restriction on the extent of alteration, extension or other changes and improvements to a property that the tenant can undertake during the term of the lease without first gaining landlord’s consent.
From experience the most common alterations which would normally require a Licence to Alter (under most leases) include:
- altering the structure
- installing additional sanitary facilities
- installing new heating or alternative service installations
- cutting through an external wall
- removing any wall, solid or partition wall
- changing any windows
Please note the above is not an exhaustive list and much will depend on the exact wording of the lease.
WHEN IS CONSENT REQUIRED?
Typically most leases will contain one of three provisions (or a combination of the three) in relation to alterations:
1. Absolute Covenant: prohibits the alteration absolutely. Only if the landlord is prepared to waive the clause will the tenant be able to make alterations;
2. Qualified Covenant: prohibits alterations save with the landlord’s consent;
3. Fully Qualified Covenant: provides that the alteration may only take place with the landlord’s consent which, the clause specifies, must not be unreasonably withheld.
If the lease is silent on the question of alterations then the tenant is free to carry out the alterations as he/she chooses.
The Landlord and Tenant Acts of 1927 and 1954 also require that landlord’s consent is not unreasonably withheld and in some circumstances for example, alterations necessary in order to comply with statute, cannot be withheld. Alterations undertaken by tenants during a lease term (both with and without landlord’s consent) are also a common source of dilapidations disputes, claims and financial burdens for the parties.
WHY DO YOU NEED A LICENCE TO ALTER?
From a tenant’s point of view, it is important to establish whether or not a licence to alter is required prior to commencement of the works as:
(i) you will almost certainly be in breach of lease terms and will expose yourself to the possibility of enforcement action being taken against you;
(ii) you may experience difficulties in selling your property if you have made unregulated changes to the demise of your property; and
(iii) it may be difficult and more costly to seek to apply retrospectively for consent once the works have been finalised.
For obvious reasons there are precautions and procedures that need to be followed before a Licence should be granted.
The aim of the Licence to Alter is to record all works that alter the tenant’s demise.
TENANT’S RESPONSIBLITIES?
As the tenant you will be responsible for setting out the proposed scope of works to the landlord, which will typically require the preparation of design drawings, structural drawings, building services drawings and specifications. The tenant will also be responsible for providing an undertaking that all works will be carried out in compliance with all relevant statutes planning consent, bye-laws, building regulations and in accordance with good working practices.
Once the scope of works, drawings and specifications has been approved by the landlord then all such information will be recorded in the Licence to Alter. Any subsequent design or specification change by the tenant will require either an addendum to the granted Licence to Alter, or a new Licence to Alter will be required.
Subject to the conditions of the lease it is normal to have a reinstatement clause, whereby the tenant has an obligation to reinstate their demise to how it was prior to occupation. All works would be at the tenant’s own cost.
The Licence to Alter has a very important financial relevance therefore the tenant and landlord have a combined invested interest to ensure the accuracy of the “As Built” drawings and specifications to avoid any dispute at the expiry of the Lease.
The complexity of the tenant’s proposed scope of works will determine whether the landlord decides to appoint his own professional team to review and approve any such designs, calculations or specifications put forward by the tenant. It should be noted that cost incurred by the landlord for procuring such advice would normally be made chargeable to the tenant under the terms of the lease terms.
LANDLORD’S DUTIES:
The Licence to Alter is normally prepared by the landlord’s solicitor and issued to the tenants professional team for approval. Once again the landlord’s cost for preparing the Licence to Alter is chargeable to the tenant.
In respect of providing consent the legislation imposes positive duties on landlord who receive application for consent, where consent is not to be unreasonably withheld. Those duties are as follows:
- To give consent except where it is reasonable not to;
- To give written notice of the tenant of the decision as to whether consent is to be granted, together with any conditions, which themselves must be reasonable;
- If consent is withheld to supply reasons for withholding it;
- To undertake the above duties within a reasonable period of time.
The burden of proof in any litigation over whether or not the landlord is withholding consent unreasonably will usually be on the landlord to show that the duties have been complied with.
THE NEW PROTOCOL
Protocol for Applications for Consent to Carry Out Alterations (the Alterations Protocol)
Landlord and tenant alike will be well aware of the potential for a simple application for consent to alterations to spin off into a monster legal dispute! Part of the problem stems from the ad hoc, unsystematic manner in which applications are both made and processed. Other issues arise because parties are unaware of the legal complexities and requirements stemming from the obligations under the lease.
It is hoped this new protocol will aid the smooth resolution of applications by tenants for consent to carry out alterations to their leasehold premises.
It applies where a tenant wishes to carry out alterations but the lease restricts their ability to do so. Compliance with the Protocol should help landlords and tenants avoid costly and unnecessary squabbles, identify the issues and resolve them quickly through alternative dispute resolution (ADR). Accompanying the Protocol is a guidance note which touches upon some of the more frequently encountered causes of dispute and offers assistance in navigating these thorny issues.
Consistent with the spirit of the pre-action protocols under the Civil Procedure Rules, the intention is to improve communication!
Yashmin Mistry, Partner at JPC Law
