The issues surrounding unlicensed alterations and this being commonplace within the commercial rental sectors comes as no surprise to most. Without periodic landlord inspections, tenants may go years during the course of their lease, having undertaken alterations without the landlord’s knowledge or consent. Whilst in some cases this does not prove detrimental to the asset or its use, in other instances there can be severe knock on effects for the landlord. In the current circumstances, now might be the right time to investigate those unlicensed alterations.
The risks of unlicensed alterations
For the landlord, unlicensed alterations can cause a number of potential issues, including permanent damage to the property, negative impacts on the EPC, invalidating insurances and building warranties, non-compliance with building regulations, fire and services issues, legal implications or the ability to re-let, amongst other things. It also causes issues at lease end during dilapidations negotiations, where the unlicensed alterations may only have been noticed for the first time by the surveyor, but due to unclear records, a tit-for-tat argument over whether the tenant installed them or not becomes apparent. There may also be issues with the alterations inadvertently becoming demised.
This is clearly a legal issue, and it is therefore imperative to clearly document all such alterations as soon as they are known in order to protect the asset. Keeping paperwork in check avoids prolonged disputes at lease end and allows both parties to clearly know where they stand.
This is sometimes easier said than done, and if there was no cause for suspicion of any unknown alterations, it is unlikely a landlord would want to spend time and money investigating when in fact there are no issues, coupled with disgruntled tenants refusing access.
The need to investigate, inspect and report now
In the current pandemic situation we find ourselves in, where offices remain empty as people work from home and industrial and retail units vacant as businesses close their doors, now is possibly as good a time as any to investigate, inspect and report on any unlicensed alterations. Where tenants are not able or willing to provide drawings and specifications for their retrospective works, a specialist surveyor’s inspection, coupled with original lease plan in hand, can determine the extent of any tenant alterations and record and log these so that a formal licence to alter can be drafted and put into place.
Whilst there is some potential downtime in the economy, as a landlord it is worth considering your portfolio and asking yourself the following questions:
- What documentation currently exists?
- Are there any concerns with existing tenants or suspicions?
- What leases are coming to an end in the not so distant future?
- Is there an opportunity to get in, inspect and report so that the i’s can be dotted and the t’s crossed, ahead of contractual lease expiry?
This will help protect not only the asset as a whole but also your dilapidations and reinstatement position so that you are not left out of pocket at lease end.
How we can help
Hollis are well versed in undertaking tenant alterations reviews, utilising our experienced projects and dilapidations surveyors coupled with in-house M&E team. Please do get in touch if we can help in any way with any existing licence reviews or retrospectively reviewing works on sites. Costs for licence reviews are usually recoverable from the tenant under the terms of their lease. We are still inspecting vacant sites where safe to do so, and can report back on findings including unlicensed alterations, with suggestions on how this is best documented moving forward.