The 2020s have been transformational when it comes to office work. A proportion of the workforce still find themselves working at home at least some of the week whilst others have fully embraced the return to office life. This shift towards a more hybrid way of working has seen many employers embracing imaginative ways to reinvent their workspaces, with a focus on employee health, wellbeing, satisfaction and performance.
We have set out below some of the questions we have recently been asked when advising Landlord clients about the steps they should take before allowing a tenant to make changes to office space.
My tenant has asked to make alterations to their office space. What do I do?
The first step is to check the lease to see what the tenant is entitled to do and the extent of your obligations. Typical wording will provide either: (i) an absolute bar on alterations: (ii) permit alterations subject to your consent; or (iii) permit alterations subject to your consent, which cannot be unreasonably withheld or delayed. The majority of leases will allow a tenant to make non-structural alterations with your consent.
Whether or not a Licence for Alterations formally documenting your consent and the extent of the proposed works is necessary will depend on how much work the tenant is proposing to carry out, as well as what the lease itself says.
Why do I need a Licence for Alterations?
As the landlord, your primary aim is to ensure the works are carried out to an adequate standard and the rest of the building is safeguarded (if the tenant is only renting part of your building). A Licence for Alterations expressly obliges the tenant to carry out its proposed works in a particular manner and a breach of a Licence for Alterations is effectively a breach of the lease.
What should a Licence for Alterations contain?
A description of the proposed works – Plans and specifications should be requested from the tenant. You should ensure the plans / specifications do accurately represent the work the tenant will carry out;
A timescale to start and complete the works – You don’t want the works to take an unreasonably long length of time but any timescale should be realistic. A three or six month window to begin with is about right;
The tenant’s obligations before the works are carried out – Before the works start you should have the tenant seek consent from the building insurer and obtain any other consents (i.e. planning permission or building regulations);
The tenant’s obligations during the works – You will want to ensure the works are carried out correctly. There will usually be obligations for the works to be carried out in accordance with: (i) the agreed plans / specification; (ii) all relevant statutes and laws; (iii) good and workmanlike procedures; and (iv) good building practice.
The tenant’s obligations after the works – The tenant should be asked to provide written notice of completion and, depending on the nature and extent of the works, as built drawings;
A reinstatement clause – Before approving any alterations you should be clear as to whether or not the tenant will be required to return the premises to how they were prior to the works being carried out when their lease expires. The tenant may be required to do so automatically, or upon receipt of notice from you to do so.
An acknowledgement about future rent reviews – The tenant will want to avoid paying a higher rent on a future market rent review if the increase has come about due to works it has carried out. There is usually an acknowledgment in the licence that any effect on the rent will be disregarded for the purposes of rent review.
A costs clause – A lease typically requires the tenant to cover your legal and professional costs in the preparation, negotiation and completion of the licence. Provisions can also be included to cover any costs you incur in connection with inspecting or monitoring the works.
In cases involving substantial structural works, you may also consider requesting security from the tenant, allowing you to either complete the works or remove the works and reinstate the premises, should the tenant fail to complete the works for any reason.
How we can help
Our Property team at BCR Law works closely with a number of prominent local landlords, managing companies and developers, advising on a range of commercial property matters, including the sale, purchase and lease of land, development, investment and leasehold management.
This article does not constitute legal advice. For advice or further information, please contact us.