Thank you for clicking on today’s property surveying blog post. In our informative blog post today, we are going to be discussing Licence for Alterations procedures. Particularly, we are going to be looking at the typical phraseology and terminology that comes into play if there is an Absolute Alterations covenant in place.
First and foremost, all leases will have some form of Alterations covenant set out within them.
There are, generally speaking, three different forms of Licence for Alterations covenants within all leases in England and Wales. These are set out as follows:
Fully Qualified Covenant
A fully qualified covenant is the most favourable Licence for Alterations covenant within a leaseholder’s lease. The covenant will ensure that the leaseholder is able to undertake their planned works, with those works and permissions not being unreasonably withheld by their freeholder.
A Qualified Covenant is similar to a Fully Qualified Covenant, albeit the key distinct difference is that the freeholder doesn’t need to provide their permission and consent for the leaseholder’s proposals. In fact, the consent can very much be refused, conditional, or even subject to a premium or levy payable to the freeholder.
As per the title of this blog post, an Absolute Covenant is the least favourable form of alterations covenant that a leaseholder can find within their lease. The covenant itself is highly restrictive and will effectively set out that the leaseholder cannot undertake their proposed alterations works.
Unlike the other two leasehold covenants set out above, there isn’t any form of freeholder discussion, interaction or permission.
Instead, an Absolute Covenant is restrictive in the sense that the leaseholder is not going to be able to progress with the planned works.
Now that we have a full understanding of the different types of leasehold alterations covenants there are, let’s take a closer look at an Absolute Covenant.
Absolute Covenants are not only restrictive by the wording of the lease, they are also highly restrictive by precedent.
Case law has significantly changed the manner in which freeholders and share of freeholders alike will view alterations covenants and in particular, an absolute one.
This case law resulted in a freeholder giving permission for works within the vessel of an absolute covenant.
Post permission, a fellow leaseholder then got in touch with the freeholder, thereby confirming that the freeholder had in fact, departed from the lease’s wording and didn’t have the legal right to do so. The courts upheld this position, thereby meaning that permission to undertake alterations with the existence of an Absolute Covenant is highly unlikely, in all cases a bit of a lost cause.
As set out above, since the outcome of this specific case, freeholders aren’t likely to enter or engage in any form of discussion respect of alterations works if an Absolute Covenant is in place.
That being said, there are still likely to be freeholders out there who aren’t fully abreast with the case law and may indeed open up and enter into discussion with the leaseholder applying for the alterations works.
It goes without saying that freeholders should seek specialist legal advice if indeed there is an Absolute Covenant in place and a leaseholder has made the necessary applications for planned works.
A freeholder runs an incredibly high risk of being held accountable both in the short and long term, should they over-ride the lease’s wording, and in particular, depart from the absolute restriction on planned alterations.
Unfortunately, for any leaseholder that is unlucky enough to have an Absolute Covenant within their lease, it is very much the outcome that they are likely to have to go back to the drawing board in respect of their planned proposals.
This could mean potentially scrapping the idea of undertaking alterations altogether. Equally, it could be redesigning the plans and proposals in such a manner to circumvent the need for alterations consent.
Examples of this could be adjusting the layout of the demise that the alterations are planned for.
Whatever the outcome may be, careful consideration needs to be given by the leaseholder undertaking the works, and their design team.
Building Surveyor Input
Here at Stokemont, it is not uncommon for us to be presented with leases and planned works whereby an Absolute Alterations covenant is in place.
As part of our Licence for Alterations services, we review the lease in the first instance. If indeed an Absolute Covenant exists, at that stage we would tend to advise the client/leaseholder/freeholder of the alterations covenant and set out the likelihood that works could be refused.
That being said, if the leaseholder/freeholder is happy to proceed and wants to seek the advice of a building surveyor, there is nothing stopping them from doing so. However, we would recommend being cautious as the value to which a building surveyor can add in the situation whereby there is an Absolute Covenant is in place is, in our opinion, relatively limited.
The final point of consideration is solicitor input. Much like the value a surveyor can add in the event of an Absolute covenant, there is also likely going to be a limited input that a solicitor has.
There are solicitors out there who specialise in Licence for Alterations matters and may be able to carefully and more precisely review the lease. However, the ultimate jurisdiction and guidance on this will be the precedent in case law we touched on above.
Licence for Alterations procedures when an Absolute Covenant is in place are tricky at the best of times.
Here at Stokemont, we would advise taking careful and considered advice, from both building surveyors and solicitors alike. You may even wish to consider undertaking the opinion and input of a barrister to ensure you are fully abreast of the matter at hand.
If your lease has an alterations covenant that is Absolute, or for that matter, Fully Qualified or Qualified, please feel free to give us a call today, and we will be more than happy to discuss how our Licence for Alterations surveyors and RICS building surveyors can be of assistance to you.