An overview of the document which permits a tenant to carry out work to a leased property
What is a Licence to Alter?
1.1 A Licence to Alter is a legal document entered into between a landlord and tenant which grants the tenant formal permission to carry out specified alterations or improvements to a property occupied under a lease. Most commercial leases contain a covenant preventing the tenant from making changes to the premises without first obtaining the landlord’s written consent. A Licence to Alter is the document by which that consent is given.
The scope of works covered by a Licence to Alter can range from minor internal alterations, such as removing a non-structural partition wall, to more substantial changes involving structural works or modifications to the building’s services. The nature and extent of the proposed works will often dictate how detailed the licence needs to be and what conditions the landlord will wish to impose.
A Licence to Alter deals solely with the landlord’s consent under the terms of the lease, and the tenant remains separately responsible for ensuring that all necessary planning permission and approvals are in place before commencing any works.
When is a Licence for Alterations needed?
A Licence to Alter is needed whenever a tenant wishes to carry out works to its leased premises and the lease requires the landlord’s consent before doing so.
Commonly, a lease will state that alterations cannot be carried out without the landlord’s prior written consent. Where this is the case, such consent cannot be unreasonably withheld.
What amounts to a reasonable or unreasonable refusal will depend on the circumstances, including the nature of the proposed works and their potential impact on the property and its value.
It is important that tenants check their lease obligations first before planning any alterations.
Who drafts a Licence to Alter?
A Licence to Alter is normally prepared by the landlord’s solicitor. The process usually begins with the tenant submitting its proposals to the landlord, often accompanied by plans, specifications, and details of any contractors to be used. Once the landlord is satisfied with the proposed works (which may involve input from the landlord’s surveyor), the landlord’s solicitor will prepare the licence document.
What should a Licence to Alter include?
A Licence to Alter should clearly set out the main terms governing the proposed works, including the nature of the alterations, the way in which they are to be carried out, and the tenant’s continuing obligations.
It should usually include:
- Description of the works – A clear description of the approved alterations, usually supported by plans and specifications, so both parties understand exactly what is permitted.
- Standard of work – A requirement for the works to be completed in a good and workmanlike manner, using suitable materials and in accordance with the approved plans. There is also usually a requirement on the tenant to make good any damage caused during the works.
- Contractors and insurance – Details of any requirements to use approved or suitably qualified contractors, together with evidence that appropriate insurance is in place for the duration of the works.
- Statutory consents – An obligation on the tenant to obtain all necessary statutory approvals, such as planning permission and building regulations approval, before the works begin and to provide copies to the landlord.
- Reinstatement – Confirmation of whether the tenant must remove the alterations and reinstate the property to its original condition at the end of the lease, or whether the alterations may remain.
- Inspection rights – The landlord’s right, often through its surveyor, to inspect the works during and after completion to check compliance with the approved plans and the terms of the licence.
- Timing – Any requirements for when the works must start and be completed.
- Indemnity – An indemnity from the tenant in favour of the landlord for any loss, damage, or claims arising from the works.
The above list is not exhaustive and there may be further information or requirements that should be covered off within the licence.
Who pays for the Licence to Alter?
In most cases, the tenant will be responsible for paying the landlord’s reasonable costs in connection with the licence, including legal fees and any surveyor’s fees. This is because the tenant is the party seeking consent, and the lease will usually contain an express provision requiring the tenant to meet those costs, whether or not the licence is ultimately completed.
A Licence to Alter protects the interests of both landlord and tenant. It gives the landlord control over what happens to its property while providing the tenant with the certainty that it can carry out the works it needs without breaching its lease obligations. Given the obligations that a Licence to Alter can impose, particularly in relation to reinstatement, both parties should seek professional legal advice before entering into one.
If you would like help with a Licence to Alter, please contact our Real Estate Team who would be happy to help guide you through the process.
This article is part of our “What Is It” series where we consider various property documentation and explain what it is and when it is used, find more in the series here.
