Commercial tenants frequently carry out alterations during a lease.
At the end of the tenancy, however, the landlord may require those alterations to be removed and the property reinstated.
This can create a significant dilapidations liability if the tenant has not planned for reinstatement.
Why might reinstatement be required?
A commercial lease may contain specific obligations requiring the tenant to reinstate alterations at the end of the term.
There may also be separate licence agreements governing alterations carried out during the tenancy.
These documents should be reviewed alongside the lease.
Does every alteration have to be removed?
Not necessarily.
The requirement will depend on the relevant contractual provisions and any agreement reached when the alteration was originally carried out.
For example, a licence for alterations may contain reinstatement provisions that determine what happens at the end of the lease.
The tenant should not assume that an alteration can remain simply because the landlord previously gave permission for it.
What types of alterations might be relevant?
Depending on the property, this could include:
- Partition walls.
- Suspended ceilings.
- Raised floors.
- Internal doors.
- Mechanical or electrical installations.
- Kitchen or welfare facilities.
- Shopfront alterations.
- Signage.
- Plant and equipment.
- Other tenant installations.
The extent of the reinstatement obligation will depend on the particular lease and alteration documentation.
What if the landlord wants to keep the alteration?
This can sometimes be agreed, but it should not be assumed.
If the landlord is prepared to waive or vary a reinstatement requirement, the agreement should be properly documented.
A tenant should avoid relying solely on an informal conversation with the landlord or managing agent.
Can reinstatement make a dilapidations claim expensive?
Yes.
Reinstatement can involve substantial work, particularly where partitions, services, ceilings or other building elements need to be removed and the underlying structure made good.
This is why tenants should consider reinstatement obligations well before lease expiry.
Stokemont’s advice
Alterations can create significant end-of-lease liabilities if reinstatement requirements are overlooked.
Before carrying out works, and again before a lease expires, tenants should review the relevant lease and alteration documentation to establish what may ultimately need to be removed or reinstated.
