Whilst the general LTA process will be the same when compared with residential, the presence of more legislation governing commercial premises is likely to mean that a higher volume of information/professional expertise will be required.
There is also the more complex nature of the contractual relationship to consider owing to the much shorter lease term of typically 5 or 10 years, for example, if the works are defined as ‘improvements’ under the Landlord and Tenant Act 1927, and if landlord’s consent is required it will be implied that the consent must not be unreasonably withheld. What constitutes an ‘improvement’ is sometimes difficult and will require the input of a solicitor.
Some alterations will have a wider impact on wider building operations in multi-let properties, such as offices or retail centres so air-conditioning or fire safety systems need to be considered with the latter example requiring possible input from a qualified Fire Risk Assessor.
Leaseholders may need to ensure that their proposals meet the requirements of the Equality Act 2010, (previously the Disability Discrimination Act 1995) with the test being one of ‘reasonableness’, whilst factoring in practicality, cost, effectiveness, disruption and available alternatives.
Sustainability also plays a strong role in that the landlord or their professional team should consider any alteration that could lead to a lower EPC rating which could provide a valid reason for non- consent, i.e. if a downgraded assessment were to negative impact on the reversionary interest of the property.
There may also be occasions where it is appropriate for a landlord to request that a financial bond be held and only retuned once works are complete. This is likely to only be relevant when works are major in nature or if the leaseholder is of weak covenant strength with the bond providing the landlord with protection if works start but are not completed. The reasonableness of this type of request is likely to be one for the solicitors to argue over.
This is not an exhaustive list of what to and what not to include in a commercial LTA with the basic question of ‘what is in the lease’ determining much of what can or can’t be demanded, coupled with the realities of the project and surrounding geography.
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