Guidance Note

The following guidance is provided to assist those seeking to obtain, or resisting, the grant of consent to alter premises demised by a lease, and should be read in conjunction with the Alterations Protocol.

Alterations outside the demise

1. A tenant has no right to carry out alterations to parts of a building which fall outside its demise. The tenant will have to negotiate with the owner of those parts if it wishes to carry out such alterations.

Alterations needing no consent

2. Many leases permit the making of non-structural internal alterations, without any requirement to seek landlord’s consent.  In such cases, although there will be no need for the tenant to ask for consent, it may be prudent for it to notify its landlord what it is doing, and to keep a photographic record of the premises before and after the alterations.  Such steps will help to forestall any subsequent issue as to whether the alterations go beyond the non-structural.

Types of restrictions upon alterations

3. Alterations clauses are of two types: (a) those that absolutely prohibit alterations; or (b) those that prohibit alterations without landlord’s consent (usually required in writing and in advance). 

4. As paragraph 11 of this Guidance Note points out, even in type (a) cases (absolute prohibition upon alterations), the tenant may be entitled to have the alterations carried out under the procedure set out in Part I of the Landlord and Tenant Act 1927.

5. In type (b) cases (no alterations without landlord’s consent), the alterations clause will usually be subject to a proviso that such consent may not be unreasonably withheld. Even where it is not, such a proviso is implied by s.19(2) of the Landlord and Tenant Act 1927, in cases where the alterations constitute improvements. Whether an alteration constitutes an improvement is measured from the tenant’s viewpoint, with the invariable results that (i) all tenant’s alterations will also be improvements, and in practice therefore (ii) landlord’s consent in type (b) cases may not be unreasonably withheld.

6. Where s.19(2) does apply, the section adds that the statutory proviso does not preclude the right to require as a condition of such consent (a) the payment of a reasonable sum in respect of any damage to or diminution in the value of the premises or any neighbouring premises belonging to the landlord, and (b) of any legal or other expenses properly incurred in connection with such consent; nor, in the case of an improvement which does not add to the letting value of the holding, does it preclude the right to require as a condition of such licence or consent, where such a requirement would be reasonable, an undertaking on the part of the tenant to reinstate the premises in the condition in which they were before the improvement was executed. It is prudent to assume that exactly the same terms would apply where the alterations clause expressly incorporates a reasonableness requirement, even if it makes no reference to such matters.

The burden of proof

7. If the landlord refuses its consent to an application for consent to alterations, it will be for the tenant to prove that the landlord’s refusal is unreasonable. This means showing that no reasonable person in the landlord’s position could have refused consent – a difficult proposition to establish. The tenant should therefore approach any application for consent with that in mind.

Unreasonable withholding of consent

8. A covenant against making “improvements” without consent is deemed to be subject to a proviso that consent is not to be unreasonably withheld: Landlord and Tenant Act 1927 s.19(2). Absolute covenants against alterations are unaffected by this provision. What is an “improvement” is something to be judged from the point of view of the tenant, but the burden of proving that the landlord unreasonably withheld consent lies on the tenant.
 
9. Where this term is statutorily implied by s.19(2) of the Landlord and Tenant Act 1927, the landlord is not prevented from requiring (as a condition of the granting of licence or consent) the payment of (1) a reasonable sum in respect of any damage to or diminution in the value of the premises or any neighbouring premises belonging to the landlord, and (2) any legal or other expenses properly incurred in connection with the giving of such licence or consent. If the improvement does not add to the letting value of the holding, the landlord may also require as a condition of such licence or consent, where it would be reasonable to do so, an obligation to reinstate. In the case of some residential tenancies, there are separate statutory codes.

10. Where there is a proviso that consent is not to be unreasonably withheld, and the landlord unreasonably withholds its consent, the tenant may carry out the works. On the other hand, in the case of such a proviso a tenant has no claim for damages against a landlord who unreasonably withholds consent; statute has not intervened (as it has in the context of alienation with the Landlord and Tenant Act 1988) to impose a duty to respond within a reasonable time. However, even if there is no obligation on the landlord to respond within a reasonable time, a failure by the landlord so to respond may amount to an unreasonable “withholding” of consent.

Part I of the Landlord and Tenant Act 1927

11. Even where the lease contains an absolute prohibition upon alterations, the tenant may yet be lawfully entitled to alter the premises without its landlord’s consent, if it follows the procedure set out in Part I of the Landlord and Tenant Act 1927 (“Part I”), which, in broad terms, applies only to tenants of business premises. Any provision in the lease seeking to exclude its effect will be invalid. What follows below is a brief summary of that procedure.

12. The tenant who wishes to rely upon Part I should first consider whether it will be possible to show that the alterations will add to the letting value of the premises at the end of the tenancy and whether it will diminish the value of other property belonging to the landlord or to any superior landlord.  This is not a pre-requisite to reliance upon Part I but it is a material factor for consideration in the event that the landlord objects to the improvements and the matter is referred to court.

13. If the tenant wishes to rely upon Part I, it should send to its landlord notice of its intention to make the improvement in question, together with a specification and plan showing the proposed improvement and the part of the existing premises affected thereby.  There is no prescribed form for such a notice but the information should be sufficiently full and clear for the landlord to decide whether to object to the proposal.

14. The landlord has three courses of action open to it upon receipt of such a notice: (a) do nothing; or (b) offer to execute the alterations itself in consideration of a reasonable increase of rent, or of such increase of rent as may subsequently be determined; or (c) object to the alterations altogether.

15. If the landlord does serve notice of objection to the tenant’s proposal within three months after service of the tenant’s notice, the tenant’s recourse, should it still wish to carry out the alterations, is to apply to court for a certificate that the alterations constitute a proper improvement. If those proceedings are successful, the tenant will then be free to carry out the alterations. Such a certificate will only be granted if the court is satisfied that the alterations (1) are of such a nature as to be calculated to add to the letting value of the holding at the termination of the tenancy; and (2) are reasonable and suitable to the character of the holding; and (3) will not diminish the value of any other property belonging to the same landlord, or to any superior landlord from whom the immediate landlord of the tenant directly or indirectly holds.

Compensation for Improvements

16. Compensation is not payable in respect of any alterations carried out by the tenant to the premises, no matter how much they might have improved their value in the landlord’s hands, unless (a) the tenant has followed the procedure set out in Part I of the Landlord and Tenant Act 1927 (see Section 6 above); and (b) the tenant’s right to compensation has not been excluded under s.38 of the Landlord and Tenant Act 1954.

17. The procedure is relatively complex, and tenants wishing to claim such compensation, or landlords wishing to resist such a claim, would be well advised to inform themselves of the statutory framework in detail.