COMMERCIAL PROPERTY – EXAM NOTES
ALTERATION CLAUSES
WHAT IS AN ALTERATION CLAUSE?
Covenant on part of tenant not to carry out any alterations to the premises ALTERATIONS AND
without the Landlord’s consent CHANGES OF USE
“not to build or erect or permit to be suffered or to be built any additional building,
structure or erection to the demised premises”
Landlord’s control over
WHAT IS ITS MAIN PURPOSE?
alterations and change of use
Short term tenancies = to prevent any alterations at all should not be more restrictive
Longer tenancies = covenant against alterations may well be qualified than is necessary to protect
Rule of thumb = lease for 15 years would need ability to make alterations to the value, at the time of the
the premises otherwise problems with securing tenant/assignments application, of the premises
and any adjoining or
LANDLORD’S MAIN CONSIDERATIONS neighbouring premises of the
landlord.
To ensure tenant does not breach external restrains such as building
regulations, planning legislation, covenants on a superior title, the common law Internal non-structural
(nuisance), environmental legislation alterations should be notified
To ensure at the end of the lease tenant does not give back a premises that is to landlords but should not
substantially different from that at the grant need landlords’ consent unless
To maintain the character & appearance & reputation of the premises and the they could affect the services
Landlord’s reversion and any interest in the Landlord’s adjoining premises or systems in the building.
TENANT’S MAIN CONSIDERATIONS Landlords should not require
tenants to remove permitted
Needs an amount of flexibility in order to adapt the business and to adapt to
alterations and make good at
market conditions
the end of the leases, unless
Will any alterations need to be done before tenant commences trading?
reasonable to do so. Landlords
Negotiations may be needed with Landlord for consent to those alterations
should notify tenants of their
before completion
requirements at least 6 months
Assignment of the lease – highly likely that anyone to whom the tenant assigns
before the termination .date.
the lease will want to carry out alterations of a certain nature.
Caution against a clause that is too flexible – tenant will suffer at rent review
TYPES OF USE CLAUSE
ABSOLUTE COVENANT - “Not to build or erect or permit to be suffered to be build any additional building,
structure or erection whatsoever to the demised premises…”
Landlord: absolute discretion over the premises and any proposed alterations to it
Tenant: cannot do any alterations (internal or external)
QUALIFIED USE COVENANT – “Not without the landlord’s prior consent in writing to build or erect or
permit to be suffered or to be built any additional building, structure whatsoever to the demised premises…”
Landlord: good degree of control maintained over any proposed alterations. Gives scope allowing alterations whilst retaining
control and makes a lease more “assignable” and would give it a higher value on rent review.
Tenant: can apply for consent to carry out alterations. Distinction must be made between alterations and improvements.
Works amounting to greater usefulness of the premises will generally be classed as improvements – Section 19(2) LTA 1927
ALTERATION CLAUSES
WHAT IS AN ALTERATION CLAUSE?
Covenant on part of tenant not to carry out any alterations to the premises ALTERATIONS AND
without the Landlord’s consent CHANGES OF USE
“not to build or erect or permit to be suffered or to be built any additional building,
structure or erection to the demised premises”
Landlord’s control over
WHAT IS ITS MAIN PURPOSE?
alterations and change of use
Short term tenancies = to prevent any alterations at all should not be more restrictive
Longer tenancies = covenant against alterations may well be qualified than is necessary to protect
Rule of thumb = lease for 15 years would need ability to make alterations to the value, at the time of the
the premises otherwise problems with securing tenant/assignments application, of the premises
and any adjoining or
LANDLORD’S MAIN CONSIDERATIONS neighbouring premises of the
landlord.
To ensure tenant does not breach external restrains such as building
regulations, planning legislation, covenants on a superior title, the common law Internal non-structural
(nuisance), environmental legislation alterations should be notified
To ensure at the end of the lease tenant does not give back a premises that is to landlords but should not
substantially different from that at the grant need landlords’ consent unless
To maintain the character & appearance & reputation of the premises and the they could affect the services
Landlord’s reversion and any interest in the Landlord’s adjoining premises or systems in the building.
TENANT’S MAIN CONSIDERATIONS Landlords should not require
tenants to remove permitted
Needs an amount of flexibility in order to adapt the business and to adapt to
alterations and make good at
market conditions
the end of the leases, unless
Will any alterations need to be done before tenant commences trading?
reasonable to do so. Landlords
Negotiations may be needed with Landlord for consent to those alterations
should notify tenants of their
before completion
requirements at least 6 months
Assignment of the lease – highly likely that anyone to whom the tenant assigns
before the termination .date.
the lease will want to carry out alterations of a certain nature.
Caution against a clause that is too flexible – tenant will suffer at rent review
TYPES OF USE CLAUSE
ABSOLUTE COVENANT - “Not to build or erect or permit to be suffered to be build any additional building,
structure or erection whatsoever to the demised premises…”
Landlord: absolute discretion over the premises and any proposed alterations to it
Tenant: cannot do any alterations (internal or external)
QUALIFIED USE COVENANT – “Not without the landlord’s prior consent in writing to build or erect or
permit to be suffered or to be built any additional building, structure whatsoever to the demised premises…”
Landlord: good degree of control maintained over any proposed alterations. Gives scope allowing alterations whilst retaining
control and makes a lease more “assignable” and would give it a higher value on rent review.
Tenant: can apply for consent to carry out alterations. Distinction must be made between alterations and improvements.
Works amounting to greater usefulness of the premises will generally be classed as improvements – Section 19(2) LTA 1927
