Uses & Works
Use Clauses
Leases will normally restrict the permitted use of the property. This will be particularly important in the case of a shopping centre or shopping arcade where there is a mix of different uses planning law will limit what a property may be used for and a breach has legal consequences. The landlord will also want to maintain the value of the property by avoiding damage to its reputation by undesirable uses.
The permitted use under a lease will usually be relevant to the rent review because the rent will be reviewed on the basis of the terms of the existing lease. Therefore, a narrow permitted use clause may reduce the market rent on future rent reviews, because it narrows the categories of potential lessees.
Scope of Clause
It is a matter for agreement between the landlord and tenant on the grant of the lease, as to how broadly or narrowly the use is defined. At the minimum, the possible uses will be limited or as provided by the Planning Permission. There will usually also be restrictions on the tenant applying for Planning Permission to change in the use without consent.
Uses can be defined very broadly or narrowly. A use could be specified as offices, retail, industrial etc. These would be quite open. Other uses could be specific to particular types of business e.g. (estate agency, shoe shop etc.).
Other Use Related Clauses
There are usually additional obligations requiring the tenant to comply with Planning legislation.
Sometimes leases provide that the tenant must use the premises for a particular purpose i.e. that the tenant must trade. This would be common in shopping centres. In these circumstances, the tenant could not stop trading at the property without breaching the lease. The tenant would usually resist such a covenant.
Alterations and Works
Leases usually restrict the tenant’s ability to undertake works to the property. This is in order to protect the landlord’s interest in his property.
Over and above the lease, there are restrictions and conditions arising from Planning Legislation, Building Regulations, superior titles and common law obligations which may be relevant to proposed building works. See our last chapter in relation to improvement notices and compensation.
The landlord will want to ensure that alterations comply with legislation in order to ensure that the property is not substantially different to that originally let and to maintain the character, appearance and reputation of its building, its rental value and the value of any adjoining premises of the landlord.
In the case of short term lettings, the landlord will want to exercise very tight control. In the case of longer lettings, a lease would not be attractive to a tenant if there was severe restrictions on the ability to make alternations.
Statutory Rights
The Landlord and Tenant Act imply a condition into a lease, that that landlord’s consent is not to be unreasonably withheld to works that are an “improvement” . What is or is not an “improvement” is looked at from the tenant’s perspective.
The landlord will only be deemed to act reasonably where his reason for refusal relates to the relationship of landlord and tenant and the property. If, in the tenant’s opinion, the landlord is unreasonably withholding consent to an improvement, the tenant may seek a court declaration that the landlord is acting unreasonably.
Covenants against Improvements
An “improvement” means any addition to or alteration of a building or structure and includes any structure which is ancillary or subsidiary thereto but does not include any alteration or reconstruction of a building or structure so that it loses its original identity.
A covenant in a lease of a building absolutely prohibiting the making of any improvement on a bulidng shall have effect as if it were a covenant prohibiting the making of the improvement without the consent of the landlord. In every such leasen which there is a covenant prohibiting , the making of any improvement without the consent of the landlord, the covenant shall, notwithstanding any express provision to the contrary, be subject—
- to a proviso that the licence or consent shall not be unreasonably withheld, and
- to a proviso that no fine or sum of money in the nature of a fine (other than a reasonable sum in respect of legal or other expenses incurred by him in connection with the licence or consent) nor any increase of rent shall be payable for or in respect of the licence or consent.
Consent to Change Use
Most longer leases specifically provide, that use may be changed with the landlord’s consent, such consent not to be “unreasonably” withheld or delayed.
The Landlord and Tenant Act provides that a term in a lease prohibiting change of the use is deemed to be modified so that it is deemed to be subject to landlord’s consent, not to be unreasonably withheld.
If the landlord refuses to consent, the tenant can apply for a Court Declaration that the landlord’s withholding of consent is unreasonable.
Statutory Modification
A covenant in a lease of a building absolutely prohibiting the change of the use of a building shall have effect as if it were a covenant prohibiting such alteration without the consent of the landlord.
In every lease of a building in which there is contained a covenant prohibiting the alteration of the use of the property without the consent of the landlord, the covenant shall, notwithstanding any express provision to the contrary, be subject—
- to a proviso to the effect that the licence or consent shall not be unreasonably withheld, but this proviso shall not preclude the landlord from requiring payment of a reasonable sum in respect of legal or other expenses incurred by him in connection with the licence or consent, and
- unless the alteration involves the erection, provision or reconstruction (otherwise than as an improvement ) of any building or structure, to a proviso that no fine or sum of money i(other than any sum authorised below) nor any increase of rent shall be payable for or in respect of the licence or consent, and
- if the alteration would cause a transfer or increase of any rates, taxes or other burden to or of the landlord, to a proviso that all expenditure incurred by the landlord by reason of the transfer or increase shall be reimbursed by the tenant to the landlord as and when so incurred and shall be recoverable from the tenant by the landlord as rent under the lease.