As a commercial tenant, you usually need the consent of your landlord if you wish to take certain actions with your lease or property. But what are your options if your landlord is not co-operating?
This article explores the issues with requiring consent in two common situations; making alterations to the property or assigning your lease to another party.
Ultimately, it is down to the facts and circumstances in each case whether consent is required, whether it may be unreasonably withheld and the implications of that. If after reading this article you require further assistance, our friendly team of commercial property solicitors can provide expert legal advice.
Jump to:
- Consent to alterations
- Disposing or assigning a lease
- When is a landlord’s consent required to assign a lease (for tenants who want to leave and transfer the lease to new tenant)?
- Are there implied obligations on landlord not to unreasonably withhold consent?
- What conditions on assignment can the landlord impose?
- What are a tenant’s options if consent is withheld?
- Tips for tenants when applying for consent
Consent to alterations
When is a landlord’s consent required to make alterations?
Depending on the terms of your lease, you might not be able to carry out any alterations without seeking the written consent of your landlord beforehand. Sometimes landlords allow internal non-structural alterations without needing consent, but this depends on negotiations at the heads of terms stage and the landlord’s requirements for the building. It's important to weigh up the pros and cons
Unless it is clear from the lease that the landlord's consent must be given in a formal licence (and there has been no variation or waiver of this), a landlord may be held to have given consent in correspondence either from itself or from its agents.
Are there implied obligations on the landlord not to unreasonably withhold consent?
If consent is needed, you’ll want your landlord to deal with your request promptly to tie in with your business plans. A delay in giving consent could significantly disadvantage a tenant.
There is no time limit for the landlord to give its consent, so you would hope to have express wording in the lease that consent must not be unreasonably withheld or delayed.
For general alterations there is no implied obligation on the landlord not to unreasonably withhold consent, so if there no express wording to that effect in the lease, they can refuse without having to give any reasons.
If consent is not to be unreasonably withheld, it is a question of fact depending on all the circumstances whether the landlord, having regard to the actual reasons for refusing consent, acted unreasonably.
What rights does a tenant have to undertake “improvements”?
In certain circumstances, the tenant can carry out improvements even the lease prohibits alterations. Under section 3 of the Landlord and Tenant Act 1927, a commercial tenant can serve a notice on the landlord of its intention to carry out certain improvements. The landlord can object within three months and if it does then the tenant has the right to apply to the Court for authorisation. If the landlord does not object in the required timeframe, the tenant may lawfully carry out the improvements.
If the lease allows alterations with the consent of the landlord, it is implied that for improvements, such consent cannot be unreasonably withheld.
Depending on the facts and if relevant notices are served, the tenant may be able to obtain compensation at the end of the term for such improvements.
What are a tenant’s options if consent is withheld?
There is not much case law on what is a reasonable withholding of consent for alterations, compared with decisions relating to consents to assign the lease (see below).
Generally, a tenant would have to show a Court that consent has been unreasonably withheld. If the landlord has not given its reasons, then the landlord must prove that it acted reasonably.
A tenant can apply to the Court for a declaration that consent is being unreasonably withheld, or it can risk carrying out the works without the consent. It cannot obtain damages. A tenant carrying out works without consent risks being forced to remove its alterations, which is often a requirement at the end of the lease even where consent has been given.
Disposing or assigning a lease
When is a landlord’s consent required to assign a lease (for tenants who want to leave and transfer the lease to new tenant)?
If the lease does not restrict the tenant’s ability to assign, a lease may be transferred to another party at any time. Most commercial leases contain restrictions which enable the landlord to keep control over the tenant’s identity and to check that it is likely to be able to meet its lease obligations. For more detailed information on the process of transferring a lease to another business, see our guide: Assigning a commercial lease.
Are there implied obligations on landlord not to unreasonably withhold consent?
A lease will usually allow assignment with the landlord’s consent and will expressly state the landlord’s consent is not to be unreasonably withheld.
If the lease permits the tenant to assign with the landlord's consent, it is also implied that the landlord's consent cannot be unreasonably withheld.
Where consent to assign is not to be unreasonably withheld, the following statutory duties are imposed on your landlord:
- To give consent, except where it is reasonable not to do so
- To give consent within a reasonable time
- To give the tenant written notice of the decision, which includes confirmation of any conditions or the reasons for refusal
- To pass on the application to anyone else whose consent is needed under the lease, such as the superior landlord or mortgage lender.
What conditions on assignment can the landlord impose?
Typical conditions a landlord may expect if they grant consent to assign a lease include:
- Authorised guarantee agreement – where you would guarantee the performance of the lease obligations by the new tenant
- A separate guarantor of the new tenant – if for example their financial standing is a concern to the landlord
What are a tenant’s options if consent is withheld?
The landlord may refuse consent if:
- monies are owed
- there has been a material breach by the tenant that has not been remedied
- if in the landlord's reasonable opinion, the assignee is not of sufficient financial standing to enable it to comply with the tenant's obligations, or
- any other reasonable circumstance
A tenant could negotiate with the landlord to explore what changes they could make to their request for it to be considered acceptable to the landlord.
If the tenant believes the landlord has unreasonably withheld consent, they could apply to the Court for a declaration that they are entitled to proceed.
If the tenant continues to assign a lease in the absence of the landlord’s consent, this would be a breach of the lease and they could be sued for damages or risk the lease being forfeited. To find out more about the process by which a landlord exercises a right to terminate a lease, read our article on Forfeiting a commercial lease.
Tips for tenants when applying for consent
When you apply for landlord’s consent, you should ensure you:
- review the terms of your lease before embarking on any changes to check whether your landlord’s consent is required and whether any charge can be made by the landlord for dealing with your request
- make your request in a timely manner to avoid unnecessary delays seeking your landlord’s consent
- serve any consent to assign application, correctly, in accordance with the terms of the lease or relevant legislation
- provide any supporting information that is required by the terms of the lease when requesting consent
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