Tenant alterations
How can a tenant make alterations to a property when the lease prohibits it from doing so?
Leases usually contain covenants restricting the tenant’s ability to carry out alterations to the property. These can range from an absolute prohibition to any alterations being carried out to a requirement that the landlord’s prior written consent is obtained before the works are commenced. Such restrictions are included to enable the landlord to retain control over its premises and, if strictly complied with by the tenant, the landlord should be left at the end of the lease term with a property that is in a re-lettable condition.
If the tenant wants to carry out alterations and there is an absolute prohibition against alterations (or the landlord will not consent to the alterations) all might not be lost for the tenant. If the alterations are “improvements” to the property (rather than merely repairs that the tenant is liable to carry out pursuant to the terms of the lease), the tenant of a property used for a trade, business or profession will be able to rely on section 3 of the Landlord and Tenant Act 1927.
Whether an alteration is an improvement or a repair is a question of degree taking into account the terms of the lease. Generally, an improvement creates something recognisably different from that which would have been created by remedying disrepair and it increases the rental value of the property.
If section 3 applies, the tenant can serve notice on the landlord of its wish to carry out specific improvements to the property. The landlord may:
- agree to the tenant carrying them out;
- offer to carry them out itself in return for a reasonable increase in the rent; or
- object to them being carried out.
If the landlord objects to the tenant carrying out the improvements, the tenant may apply to the court for authorisation to proceed with the relevant works. The court will authorise the improvements if they are likely to add to the rental value of the property on the termination of the lease, are reasonable and suitable to the character of the property and will not diminish the value of any other property owned by the landlord.
After completing the improvements, the tenant should apply to the landlord for a certificate that the works have been completed. If the landlord does not give the certificate within one month or refuses to give it, the tenant should apply to the court for it. The existence of the certificate is important in terms of the improvements being disregarded on rent review (depending on the terms of the lease) and the tenant seeking compensation from the landlord at the end of the lease term.
This article contains information of general interest about current legal issues. It does not give legal advice and specific advice should always be sought about your particular circumstances. We will be happy to assist.
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