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Alterations to your property - what to do when you leave

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How far can a commercial tenant alter a property? That depends on if it is classed as a fixture or a chattel?
 
A recent case has highlighted the need to ensure a distinction between alterations which are tenant’s fixtures and alterations which are tenant’s chattels.

The case involved partitioning which was installed by the tenant during initial fit out works in accordance with a licence to alter. Both the lease and the licence to alter required the Landlord to give notice of any reinstatement the Landlord reasonably required before the end of the term. The tenant exercised a break option with 2 pre-conditions: 6 months’ prior written notice and vacant possession.

The Landlord did not serve a notice of his requirement to reinstate the premises. The case turned upon whether the partitioning alteration was a fixture and therefore formed part of the premises.

The partitioning was not carried out in accordance with the specification attached to the licence to alter and therefore the partitioning was in breach of the licence. The validity of the licence was conditional upon compliance with the condition on which the licence was given. As the conditions were not met, the partitioning became unauthorised works and therefore should have been removed automatically by the tenant. This meant that even if the partitioning was not a tenant chattel, the tenant should have removed it and failure to do so meant vacant possession had not been given.

Based upon expert evidence it was found that the partitioning was demountable and therefore the tenant did not in fact give vacant possession.

On sending or receiving a break notice, parties to the lease should review the lease and all supplemental documents (including licences to alter) carefully.

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Terminating a commercial lease

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Getting ready to leave? We explain what should be done when preparing to leave a property once a commercial lease ends.
 
When a lease is nearing the end of its contractual term or a break clause is being exercised, the lease should be read and construed as a whole, particularly where clauses are interlinked e.g. alterations and yielding up.

A recent dilapidations case involved the yielding up of the premises by the tenant where carpet tiles had been replaced in strips rather than tiles. The tenant served a break notice but the landlord did not reply (there is no obligation for the landlord to do so).

After the lease had ended, the parties were unable to agree a figure for the dilapidations liability. Following a court hearing it was held that the re-carpeting works had not been carried out in accordance with the lease terms. On appeal, the tenant argued that the carpet tiles were a tenant’s fixture and the court agreed – carpet tiles were a fixture and the alteration was a permitted alteration. The new carpet was not out of repair at the end of the lease and any works would be carried out by the landlord once a replacement tenant had been found. The tenant should not need to finance any void period of the premises once compensation had been paid for the tenant’s breaches of covenant.

Some leases e.g. new or re-furbished premises have a specification attached. Clear wording in such a lease makes it easier to give advice and ensures that each party are clear about their obligations.

What does this mean?

If the parties had followed best practice on terminal dilapidations, discussions about the carpet would have taken place long before lease expiry. More importantly, a party who refuses to engage in the form of dilapidations protocol is running the risk of being penalised on costs.
 

More information

Contact our Commercial Property Department for further information on our services. Contact 01708 229444 or This email address is being protected from spambots. You need JavaScript enabled to view it. to speak to a member of the team at any of our offices in Brentwood, Hornchurch and Upminster. We are also able to see clients in Leigh on Sea.


The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. Specific legal advice should be taken on each individual matter. This article is based on the law as at August 2016.

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Commercial Leases - To Renew or Not?

Commercial lease renewals under the Landlord and Tenant Act 1954 continue to be a frequent source of litigation for the Courts.
 

As the commercial property market continues to come out of recession, there have been an increasing number of cases where landlords are refusing to renew commercial leases. 

Under the LTA 54, a commercial tenant within the Act has the right to renew the lease on basically the same terms as previous subject to agreement as to rent and modern updating. 

There are however specific grounds on which a Landlord can refuse to renew. 

An example of this was in the case of Mussellwhite v Yoseffi. The landlord opposed the renewal of a lease where the tenant had persistently refused the landlord access to inspect the property, had made rent payments late, and had failed to open the premises as a shop in contravention of the lease. 

The Court agreed that the landlord was entitled not to renew and terminated the tenant’s interest.  The tenant appealed and in July 2014 the Appeal Court ruled in favour of the landlord holding that lack of access and failure to use the premises as agreed were substantial breaches of the lease.

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