Alterations and upgrades: do you need a licence?

Most pharmacy businesses consider refitting or renovating their premises at some stage, says solicitor Ben Butterworth. You might want to fit out a new property with your own design and branding, or you may want to reconfigure the layout or install new facilities in an existing property.

The lease terms should set out which alterations are and are not permitted. If alterations are permitted, this will likely be subject to conditions. The landlord needs to protect the integrity of their premises and its value. They need to retain some control as to the premises’ condition so they can re-let it when your lease ends, sell it, or use it as security for a bank loan.

ARE MY ALTERATIONS PERMITTED?

Structural or external alterations will usually be prohibited because they pose too great a risk to the landlord’s interests. There may be exceptions to this rule, such as permission to affix shelving or signage to the walls, or to alter the shopfront. Interior and non-structural alterations are typically permitted, provided the landlord first gives their consent. However, as explained below, a lease may dictate further conditions that you must satisfy.

DOES MY LANDLORD NEED TO BE REASONABLE?

This will depend largely on the provisions in the lease. Commonly, the lease will oblige the landlord to be reasonable when considering proposed alterations, but this is not always the case. Some landlords prefer the ability to veto alterations and give consent at their own discretion. You must consider the wording of your lease carefully. We recommend seeking expert advice.

However, there is a helpful statutory provision when it comes to ‘improving’ your property. Section 19(2) of the Landlord and Tenant Act 1927 says a landlord must not unreasonably withhold consent when a tenant wishes to undertake alterations which amount to ‘improvements’ to a property. Whether or not your alterations amount to ‘improvements’ is likely to be a discussion point with your landlord.  

CONSIDER THE CONDITIONS

When a landlord gives consent, they will likely give it subject to a series of conditions. These will vary according to the nature of the works and are often the subject of negotiation. They may include: 

• Before starting, you may need to obtain certain consents and permissions, such as planning and building regulations consents, as well as the consents of the property insurers and banks who have security over the property
• How, when and who carries out the works. There may be limits on which hours or days the works can be undertaken. The landlord could impose standards about the quality of the works they are expecting, how they are carried out, the materials used or even the qualifications and expertise of your contractors. These should be carefully considered to ensure they are appropriate and realistic
• After the works are finished, you may be required to inform the landlord of completion and allow them to inspect. There may also be longer-term provisions relating to the completed alterations, such as statements as to whether they need to be removed again when your lease ends. 

WHAT DOES THE CONSENT MEAN?

If your landlord is willing to consent, their consent will probably take the form of what is called a ‘Licence to Alter’ or ‘Licence for Alterations’, which will be negotiated to cater for the consent itself and any associated conditions.

The landlord’s consent may only apply for a fixed period of time, within which the works must commence (or even complete) or consent will lapse and a fresh one will be required. Some landlords are amenable to granting more flexible provisions that allow a tenant to request an extension of time where they have not been able to start or complete works on time, as this saves time for both parties in rewriting the Licence. 

It is worth noting that obtaining landlord consent does not usually oblige you to start the works. Most Licences provide that the tenant is permitted to do them if they choose to proceed. This means that if you change your mind, you can simply let the consent period expire. Do check your Licence to see what it provides in this regard.

The extent to which alterations are permitted is a matter for the parties to negotiate when a lease is first prepared and is a key point to consider when drawing up heads of terms. We recommend you take specialist legal advice to ensure these provisions will be suitable for your needs.

The above is a general overview. We recommend independent legal advice is sought for your specific concerns.

Ben Butterworth is a solicitor in the real estates team at Charles Russell Speechlys LLP 

ben.butterworth@crsblaw.com