What is a License to Alter and Why Do I Need One?

If you are going to take a lease on new premises or propose to refurbish your existing office space, it is very likely as Leaseholder you will be required to obtain a License to Alter from the Landlord in compliance with the terms & conditions of your lease.

As the Leaseholder you will be responsible for setting out the proposed scope of works to the Landlord, which will typically require the preparation of design drawings, structural drawings, building services drawings and specifications. Together with providing an undertaking that all works will be carried out in compliance with all relevant statutes planning consent, bye-laws, building regulations and in accordance with good working practices. Whether you propose to make structural alterations or build internal office partitions, you will require a License to Alter before work commences.

The aim of the License to Alter is to record all works that alter the Leaseholder’s demise. As an example you may be considering taking a 5-year full repairing and insuring lease on 10,000 ft2 of CAT A office space. Presently the office space is open plan and you wish to build a number of new cellular offices and meeting rooms. The work will require alterations or enhancements to the building services, suspended ceiling alterations, partitions and data cabling.

Once the scope of works, drawings and specifications has been approved by the Landlord then all such information will be recorded in the License to Alter. Any subsequent design or specification change by the tenant will require either an addendum to the granted License to Alter, or a new License to Alter will be required. If the tenant makes material changes to their demise without obtaining a License to Alter from the Landlord or Managing Agent it could be considered a serious breach of the Lease.

Subject to the conditions of the lease it is normal to have a reinstatement clause, whereby the tenant has an obligation to reinstate their demise to how it was prior to occupation. In the case of the above example this would require the tenant to remove all internal partitions, reinstate the suspended ceiling to the original configuration and put back the building services to how they were. All these works would be at the tenant’s own cost, however the aforementioned cost should not include any betterment.

The License to Alter has a very important financial relevance therefore the Leaseholder and Landlord have a combined invested interest to ensure the accuracy of the “As Built” drawings and specifications to avoid a dispute at the expiry of the Lease.

The complexity of the Leaseholder’s proposed scope of works will determine whether the Landlord decides to appoint their own professional team to review and approve any such designs, calculations or specifications put forward by the Leaseholder. It should be noted that cost incurred by the Landlord for procuring such advice would normally be made chargeable to the Leaseholder under the terms of the Lease Agreement.

The license to Alter would normally be prepared by the Landlord’s solicitor and issued to the Leaseholders professional team for approval. Once again the Landlord’s cost for preparing the License to Alter would be chargeable to the Leaseholder.

Conclusion

Your project could be at risk if you don’t obtain a License to Alter for the proposed scope of works before commencing the fitting out or refurbishment work. We would strongly recommend that you should obtain a quotation from the Landlord for any professional fees that may be deemed necessary.