The last two years have shown that we have adapted to difficult and restrictive circumstances in the ways we work. In many ways we have experienced a paradigm shift that is establishing hybrid, flexible patterns for greater work-life balance.
Although many of us are returning to our offices, others have taken the opportunity to establish fixed working spaces at home, often expanding, extending or altering existing spaces to accommodate and maximise the benefits of remote working.
In the context of leasehold property, proposed alterations to a property should consider the conditions and covenants of a lease which require consent, and the process and implications of this for both landlords and leaseholders.
The clauses pertaining to alteration will generally fall into two types – firstly where a leaseholder cannot carry out the works without first obtaining consent. Consent should not be unreasonably withheld if the alteration is an improvement. Secondly, leases may contain clauses to prohibit any changes to be made to the property at all even where consent is requested and may require a variation of the lease in order to remove the restriction.
These covenants are referred to as qualified or absolute covenants, and the criteria for these refer to the extent to which alterations can be permitted:
Qualified Covenants
“Not to make any structural alteration or addition to the Property without the landlord’s consent, such consent not to be unreasonably withheld.” In typical wording such as this, alteration or addition will be permitted if the landlord consents. This may allow the landlord to request information in relation to the alterations in the form of a copies of plans or structural surveys for example. If the covenant then goes on to say that the Landlord’s consent should not be unreasonably withheld or delayed the request will need to be considered appropriately. Under s 19(2) of the Landlord and Tenant Act 1927 (LTA 1927), the alterations covenant is deemed to be subject to a proviso that such consent cannot be unreasonably withheld (a ‘fully qualified covenant’).
Kate Edwards (right)
Absolute Covenants
“Not to make any structural alterations or additions to the Property.” This is a covenant which prohibits the leaseholder from undertaking any work to the structural elements of the building or any other areas which fall outside of their demise. This clause will not allow the landlord to permit the works without lasting implications to the contractual relationship. The difference between these covenants, although seemingly small, creates issues for Landlords who are met with requests from leaseholders. Careful consideration should be given to each individual lease and the Landlords ability to grant consent. It is also important to note the distinction between alteration and improvement. An improvement is an alteration which enhances the premises from the tenant’s point of view. Consequently, where the lease specifies that an alteration requires the landlord’s consent, the landlord will almost certainly not be able to withhold that consent unreasonably.
It is therefore important to understand what constitutes ‘reasonable’.
- A landlord cannot refuse on grounds that are unrelated to its own property interests
- It is for the tenant to show that the landlord has unreasonably withheld consent
- There is no need for a landlord to prove that its conclusions are justified if they are conclusions that might be reached by a reasonable landlord in those particular circumstances
- It may be reasonable, depending on the particular circumstances, for the landlord to refuse consent to an alteration in order to change use, even if that use is not forbidden by the lease
- Although the landlord need only consider its own property interests in considering consent, there may be cases where this would be disproportionate in the context of the detriment to the tenant
- Consent cannot be refused on grounds of pecuniary loss alone (in that event, compensation should be sought as a condition to consent)
It is important to note that each case falls to be decided on individual circumstance and the nature of covenants contained within a lease. Courts will look at whether the landlord, having regard to its actual reasons for refusing consent, acted unreasonably. With a considerable focus on building safety and remediation, the questions of reasonableness and consent are ever more important. Recently, JB Leitch successfully represented a management company in a County Court case where a tenant made alterations to a property without consent, a decision which also highlights the penalties that can be imposed.
Our client, a management company, became aware of extensive works being undertaken by a tenant in a duplex property, which included the removal of internal walls and fire doors, reshaping and enlarging of rooms and repositioning of plumbing and electrical installations. The management company initially had no knowledge of the said works which were carried out without licence or consent. The tenant sought retrospective consent (which was not granted owing to the lease containing an absolute prohibition) but was given a grace period within which to restore the property. The tenant agreed to undertake such works, but an inspection revealed that no restoration of the property had been undertaken.
Reinstatement works were ordered to be made in accordance with plans presented to the Court and included reinstatement of internal walls, fireproofing of internal doors and fireproofing of lights. The claimant was permitted to inspect the works following completion, and the defendant was to use best endeavours to obtain a Building Regulation Certificate, together with certification of electrical works. Further, the defendant was ordered to make payment of our client’s costs on the indemnity basis.
One of the most notable and cautionary decisions regarding alterations was the high profile and long running case of Duval (Respondent) v 11- 13 Randolph Crescent Ltd (Appellant) [2020], which arose from an appeal by the landlord and freehold owner of the building in question.
The appeal considered whether, on the construction of the clauses in the lease, the landlord was entitled, without breach of covenant, to grant a licence to a lessee to carry out work which, but for the licence, would breach a covenant in the lease, where the leases of the other flats required the landlord to enforce such covenants at the request and cost of any one of the other lessees.
In many regards, the case offered a cautionary note to landlords in reiterating the need to be vigilant in the drafting and consideration of lease covenants and licensing consent – specifically noting the need to be clear and specific regarding absolute covenants and mutual enforceability. In summary, this case highlights the wider point that care should be taken by landlords in giving consent and shows that the contents of leases are important and require careful consideration in order to mitigate misinterpretation and the potentially costly consequences.
