Gardner Leader

Hidden Dangers

Gardner Leader Legal Question Time article – September 2007

The Hidden Dangers of Improvements and Alterations to Commercial Property

Tenants of commercial property may from time to time consider that improvements or alterations are necessary to their property to revive or stimulate business to perform better and grow. After all, the tenant is in business to make money.

This month, Alastair Goggins, Litigation Partner at Gardner Leader Solicitors, considers what Tenants and Landlords ought to be considering if commercial buildings are to be altered and improved in any way.

The first question is one of construction and leads both parties to the Lease. A Lease of commercial property usually includes Tenant Covenants restricting alterations to the property, either absolutely or subject to the Landlord’s consent. The reason for this is so that at the end of the Lease term, the property will be in an acceptable state to be let again. It’s therefore important to consider this first.

The Landlord and Tenant Act 1927, provides that where the Landlord’s consent is needed for improvements, then that consent is not to be unreasonably withheld. Therefore, Landlords can withhold their consent, but only if it is reasonable for them to do so. The following principles warrant consideration:

• A Landlord is not entitled to refuse consent on grounds that have nothing to do with a Landlord’s property interests. It is for the Tenant to show that the Landlord has unreasonably withheld consent. It is implicit that the Tenant must make its proposals sufficiently clear so that the Landlord can decide whether it should refuse to give consent.
• The Landlord must prove that conclusions which led to the refusal were reasonable; the Landlord cannot refuse consent just on financial loss alone. So what happens if you are a Tenant and you wish to improve or alter your premises and you have written to your Landlord, but you believe that the Landlord is unreasonably refusing consent?
• You could decide not to proceed with your planned premises refurbishment. This could affect the financial health of your Company and indeed hold back its growth.
• You could carry on and carry out the work hoping that the Landlord will come round to the idea in time; this of course could lead to legal proceedings.
• You could apply to the Court for a declaration that you are entitled to proceed with the improvement without any further consent. If this option is taken, then it is for the Tenant to prove that no further consent is necessary. As the Tenant, it is important to make sure that the Lease is being complied with and if you have supplied the Landlord with all relevant information that the Landlord needs to decide whether to grant his consent or not, and the Landlord does not respond within a reasonable time, then you are likely to succeed.

For the Landlord it is important that if one of its Tenants applies for consent, that the Lease is first checked and then, if necessary, the request from the Tenant for consent is dealt with expeditiously. It is evident from a number of recent cases that the Courts require Landlords to act promptly to such requests; certainly no response after two months from the Landlord would place the Landlord in extreme difficulty in defending any Court proceedings brought by the Tenant. In certain circumstances, Landlords could find themselves with heavy penalties for not responding to the Tenant’s request.

It is, therefore, important for Landlords to act quickly to requests for consent and make sure that if any further information is required to consider the options open, then the request for this information must be made as soon as possible. Once a decision has been made by the Landlord, then the Landlord should provide a written decision to the Tenant as soon as possible.

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