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30 Apr 2024

Real estate briefing: Consenting to alterations - if not, why not?

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The scenario

You're the landlord of a large mixed use block.  The tenant of the top floor wants to carry out some substantial works which will add significant value to the tenant's leasehold property.  The tenant has sent you an informal email asking you to confirm your approval for the works.  You don't like the sound of the works and, as the tenant isn't proposing to cut you in on the increased value, you're intending to go back with a simple "no".  That's OK, isn't it?

The Lease

No.  The first thing you should do is to check your lease.  What does it say about alterations?  Most leases will have a provision saying that tenants can carry out internal non-structural alterations provided that they obtain the consent of the landlord.  Some leases will also permit structural alterations on the same basis. 

Typically, leases will say that the landlord's consent to alterations must not be unreasonably withheld.  But statute will imply an obligation on the landlord to act reasonably, even if the lease doesn't specifically say so. 

So, in short, you can't just say "no" because there's nothing in it for you – you must act reasonably.

The tenant's application was in an informal email, how seriously do I need to take it?

Just because the approach appears informal, it doesn't mean that it won't trigger obligations.  All that the tenant needs to do is to make it clear that it is requesting consent and that a response is required.  If you do decide to consent, be very careful how you respond.  To preserve the value of your asset you should enter into a formal deed to grant consent.  But it's easy to accidentally send a response that inadvertently waives that requirement for a formal deed.

Reasons

OK, so you're intending to respond formally, but you still want to refuse consent. You're sure that you'll be able to find plenty of reasons if push comes to shove, but you're busy and don't want to spend time thinking about it now. Can't you just refuse now and come up with some reasons later?

No.  If the refusal of consent is challenged you will have to show what, subjectively, made you decide to refuse consent.  So, if you have lots of reasons for not wanting to consent to the works, you should, in conjunction with your lawyers, state and explain what those reasons are and communicate that to the tenant. You won't be able to just add in reasons later with hindsight.

Do my reasons have to be fair?

Your reasons have to be objectively reasonable rather than "fair".  The good news is that whether they are deemed to be reasonable will be judged from the viewpoint of a hypothetically reasonable landlord, taking into account the specific circumstances that the parties are in.  They must relate to your interest in the property, rather than to any wider interest that you may have.

I'm not clear on exactly what the tenant intends to do and am concerned that the works might damage the building.

If you don't have enough information to make your decision, then you're well within your rights to ask for more, or more detailed, information.  If the tenant refuses to provide adequate information that is likely to be a reasonable ground for refusing consent.  Be careful though – and discuss this with your lawyers – you should respond to the tenant's request for consent as comprehensively as you can, and you can't keep going back to ask for more information on a piecemeal basis.

What if some of my reasons aren't deemed to be "good reasons"?

You've got four or five reasons for objecting to the proposed alterations.  Should you state all of your reasons or just pick what you see as the "best" reason?  You're concerned that if you put several reasons in your response letter to the tenant, the tenant has a better chance of finding one that isn't deemed to be reasonable. 

Some good news here.  If you state several different reasons for refusing consent, and one or more of them is deemed unreasonable, you will still succeed provided that the valid reasons looked at individually or collectively constitute reasonable grounds to refuse consent.

If I am considering an application for consent, can I ask the tenant to meet my fees and my lawyers' fees?

Yes.  You can request an undertaking that your reasonable costs are met.  If the tenant refuses to give you an undertaking for costs that is likely to be a reasonable ground for refusing consent.

The key message…

Consenting to alterations can be a tricky area.  It's sensible to get legal advice as soon as you are asked to consent to works as a lot will depend on the facts and circumstances of the particular matter.  The recent case of Messenex Property Investments Limited v Lanark Square Limited dealt with many of the issues addressed above and highlights how easy it is for parties to take the wrong approach. Our expert team can help you avoid the pitfalls and make sure that you and your building are properly protected.

If you have any questions please contact James Styles, Catriona Berman, or your usual contact at Stephenson Harwood.

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