Commercial alterations can become a major issue when a lease ends.
A tenant may have obtained permission to carry out works, but that does not necessarily mean the alterations can remain indefinitely.
What happens to alterations at lease expiry?
The answer depends on the lease and any licence for alterations.
The tenant may have an obligation to reinstate some or all of the works when the tenancy ends.
This can result in significant dilapidations costs.
What should be checked?
The relevant documentation may include:
- The lease.
- Licence for alterations.
- Side letters.
- Consent documentation.
- Plans and specifications.
- Subsequent agreements with the landlord.
These documents should be considered together.
What if the landlord previously approved the work?
Permission to carry out an alteration does not necessarily remove an obligation to reinstate it.
A licence may specifically reserve the landlord’s right to require reinstatement at the end of the term.
This is why tenants should review the original alteration documentation rather than relying on the fact that the works were previously approved.
Can the landlord simply demand a complete refit?
Not necessarily.
The tenant’s liability needs to be considered against the contractual obligations and the circumstances of the property.
Where reinstatement is required, the appropriate scope and cost of the works should be assessed.
Stokemont’s advice
Alterations should be considered at both ends of a commercial lease: when they are proposed and when the lease approaches expiry.
A review by a building surveyor can help identify potential reinstatement obligations before they become an expensive end-of-lease surprise.
