Alterations—a tenant’s practical lease negotiation guide
Alterations—a tenant’s practical lease negotiation guide

The following Property guidance note provides comprehensive and up to date legal information covering:

  • Alterations—a tenant’s practical lease negotiation guide
  • Landlord’s alterations objectives
  • Tenant’s alterations objectives
  • Alterations at Heads of Terms
  • Common structure of an alterations clause
  • Prohibited alterations
  • Works permitted with Landlord’s consent and LTA 1927, s 19(2)
  • Works permitted without Landlord’s consent
  • Other alterations conditions
  • Alterations and the demised premises
  • more

This Practice Note discusses a tenant’s considerations when negotiating alteration provisions in a rack rent commercial lease that is a new lease for the purposes of section 1 of the Landlord and Tenant (Covenants) Act 1995 (LT(C)A 1995). It identifies key tenant concerns (both at heads of terms and during lease negotiation), suggests possible tenant amendments and considers how the alterations clause interacts with other lease provisions.

Landlord’s alterations objectives

For a landlord, controlling alterations is important to protect the value of its investment. The landlord should ensure that:

  1. it retains appropriate controls on alterations and how they are carried out

  2. the tenant is required to reinstate any alterations that reduce the landlord’s ability to re-let the premises on determination of the lease

  3. any alterations that adversely affect the rental value of the property are disregarded on an open market rent review

  4. a record is maintained of all works carried out and all necessary consents to such works, and

  5. tenant alterations will not result in any claims for nuisance or disturbance from third parties such as neighbours or other tenants in the building

At the same time, the landlord should be aware that if the alterations provisions are too restrictive a tenant may not be able to operate its business effectively from the premises and/or they could be regarded as onerous