You may come across a legal document called a ‘Licence of Alterations’ or ‘Licence to Alter’ related to what alterations a tenant has (or wants) to carry out at a property.
This is when you have a let property and a landlord and tenant, where the tenant usually wants to make some physical changes and alterations to their area.
It boils down to the landlord or freeholder giving consent to this and all the nitty-gritty details of how and when this is carried out.
It’s often with commercial properties, where there’s a lease in place and usually big and regular changes needed by a business tenant – for example, a new office layout with a new partition and a breakout area, or a retail shop new fit-out with shelves and counters.
Upon first impressions, it may sound straightforward, and after all, if a tenant has a lease of the area, they can surely get on with changes. The landlord may even be okay with this in principle.
However, when managing properties, you realise there’s more to this. Not only whether they're completed correctly and compliantly but to ensure there is a straightforward way in which they are removed and resolved at the end of the lease.
The five D’s of Licence of Alterations
Later, there’s a FAQ section to help cover all kinds of questions we see asked on the subject.
In the meantime, here are the main takeaway points to note about these documents, no matter what interest you have in the property – a landlord agreeing on them, a tenant requesting them, or a managing agent overseeing them.
1. The detail
Stating the obvious, you need first to outline the details of the proposed alterations – what they are, where they’ll go, and what’s involved.
Supplying a full specification and annotated plans should do the trick, but larger projects may require more details.
These need to delve into issues like what services are affected, like utility supplies and fire alarm detection, and if anything stretches outside the main lease demise, for example, external air conditioning systems.
The icing on the cake is what specific contractor and instruction is proposed to do these works, including their own health and safety and risk assessment details for the property.
2. The decision
It would be best if you were clear on who needs to consent to this and how this is established.
Once you check any lease, it should state who it is, usually the landlord, immediate freeholder, or Management Company. However, check if others are also involved, for example, guarantors of the lease, funders and mortgagees, and other third-party rights like building insurers.
Then check how this is sought, with any specific notices and people these details need to be issued to, and even whether formal post copies rather than just emails.
3. The delay
Part of the landlord's and maybe other people’s consent to these alterations means they must act ‘reasonably’ in granting permission, which is often required in current leases.
However, even if not specifically obliged to in the lease, legislation can often imply that a landlord has to be reasonable in this and not just say no to the wrong colour walls, for example.
However, part of this is the timing aspect that people don’t realise. Such consent must be reasonable in principle and time-wise, and how quickly they issue this agreement.
Therefore, a landlord hanging on for many months can be seen as unreasonably delaying if a tenant needs to decide on these changes; weeks can be more reasonable.
Although this is a common-sense principle, you must watch out for things stretching out before you know it, and the process ends up being too long. Even simple confirmation and reissuing of initial plans and details can soon take time.
4. The dollars/pounds
Not only will an occupier and tenant have a budget in mind to pay for all their alterations and proposed changes, but the fees and costs involved in gaining the formal consent through a Licence of Alterations of the landlord and other parties through the leases and documentation can soon rack up.
This can be crazy numbers in the thousands of pounds once you involve people like solicitors providing the formal documentation. For a relatively small project costing only a few thousand anyway and a straightforward office reconfiguration or flat upgrade, this can substantially increase overall costs.
There may be a simpler and cheaper way around this through more side letters from a managing agent rather than solicitors, but this shouldn’t automatically be assumed.
Also, don’t forget other costs than solicitors, such as surveyors and managing agents managing the process or other third-party costs.
5. The documentation
So, you have your proposed alterations to the property all planned, and the landlord and others are saying they agree to these.
The final stage is then getting all this documented, which may be pretty involved as per the last point on costs.
Solicitors maybe need to issue a formal legal agreement, often called a Licence of Alterations, whereas, on the other scale, a managing agent may issue a simple side letter.
The ultimate way of deciding this is what any lease says about the matter and even any prescribed letters and conditions in this.
Whatever it is, be prepared for this causing unexpected delays and costs you did not expect – and organise accordingly.
Frequently Asked Questions of Licence of Alterations
Here are some popular FAQs we often see asked on this subject, and contact us if you have any other queries we can try and help shed light on:
What counts as a property alteration?
This is when a change in the layout and fittings of a property are proposed, often by an occupier. So an office tenant may want new partitions and layouts, or a retail shop a new fit out for a new type of letting.
As well as big items like changing the structure and new walls/ceilings, it can also cover smaller and less obvious ones like recarpeting, new electrical services, and even shelves fitted to the walls.
Can I make alterations to a leasehold property?
This depends on what the lease says. If nothing, then, in theory, you can do anything, but still advisable to inform the landlord.
Otherwise, the lease will say what needs the landlord’s permission and any conditions to this, for example, providing plans and details. Different types of alterations may or may not require formal consent, often called absolute and qualified prohibitions.
What is a Licence of alterations?
This is the legal document signed by the landlord and tenant to formally agree the landlord’s consent to the proposed tenant alterations. Linked to the lease with specific details, this is a formal (and costly) way to document this.
What is an application for alterations and landlord’s consent?
This is when a tenant sends details to the landlord, asking them to agree and issue consent to these proposed works formally.
The lease may say how and when this application is issued, what notices etc, are required.
Do you need a Licence of Alterations?
Not always; it depends on what the lease says. Even if the tenancy is silent on how you document their consent, a landlord may be able to reasonably argue that this is needed as a formal way to document their agreement to the alterations.
How long does a Licence of Alterations take?
In reality, it probably takes at least a few weeks, but this depends upon how quickly the solicitors and other parties agree and sign this.
It’s best to agree on as many matters upfront as possible and then chase everyone to ensure it happens quickly.
How do you get a template for a Licence to Alter?
You really need this from a solicitor, and even if you get hold of a standard template, you need to know what unique changes to make to this.
Sometimes you can document by a side letter or through an agreed clause or schedule in the lease.
What letter giving consent to alterations is needed?
The formal way is a Licence of Alterations which is a fully legal document rather than a letter.
However, a side letter may suffice, which you need legal or property surveying advice on to agree.
What RICS and statutory guidance are there for alterations?
The RICS have a professional statement on leasing business premises, which includes an aspect of agreeing on alterations with a new letting.
There is also a separate Protocol for Applications for Consent to Carry Out Alterations (the Alterations Protocol) agreed with the solicitor’s input which is helpful to refer to.
How do you get landlords or freeholders’ consent to alterations at a property?
After checking what the lease says about how and where you give them notice, you need to issue full details in writing to them.
This can be followed or preceded by a conversation, but you need to get details in writing at some point.
The landlord or freeholder then needs to confirm their agreement and other information or documentation required to agree on this.
The final stage is documenting this through a Licence of Alterations or side letter.
How do you get landlord’s consent for planned alterations?
As mentioned above, you need to issue their details to confirm what further information and conditions are required.
This will then need formal documented when agreed in principle, still ‘subject to contract’ until everything is completed (although in some cases, this can still imply full consent)
When can a landlord or freeholder refuse consent?
The lease usually says the landlord has to act reasonably; if not, then legislation often helps imply this.
This may include situations where it will cause damage or loss in value to their property or have concerns about the way it will be completed.
Can a tenant do alterations to a property without consent?
It depends on what the lease says. If silent on the matter, they should be able to do so without permission.
However, often there is an obligation in the lease for the tenant to issue details to the landlord for them to formally then grant consent to this.
What is the cost and consent fees for a Licence of Alterations?
These usually involve any legal solicitor costs for the documenting and surveying or property management costs for overseeing this.
Often this is at least a few hundred pounds but could escalate into the thousands if larger scale and importance.
What are the pitfalls of a Licence to Alter?
The main concern is the cost and delays in issuing these, which must be through solicitors.
Also, ensure they correctly reflect the circumstances of the proposed works rather than applying a standard off-the-shelf approach.
What does ‘not to be unreasonably withheld or delayed’ mean with giving consent to alterations?
This refers to how a landlord consents to a tenant’s proposed alterations. Even if not stated in the lease, legislation often implies that this must be reasonable.
In short, the landlord can’t make crazy conditions or take too long in delaying the matter, for example, insisting on the work being bright coloured purple because that’s their favourite colour!
How do you get retrospective consent to alterations?
This is where alterations have already been carried out, and you need to agree landlord’s consent to these quickly.
Make sure everyone agrees to this in principle and not wanting to claim damages or even an injunction to remove these. Then issue details to them for documented agreement as soon as possible.
Does a licence of alterations need to be registered?
Probably not in terms of with Land Registry, but a solicitor can confirm this (who will be instructed when agreeing on these anyway).