Avoid disputes over property alterations
A new protocol will aid the smooth resolution of applications by tenants for consent to carry out alterations to their leasehold premises, explain Caroline Shea QC and James Tipler
Landlord and tenant practitioners will be well aware of the potential for a simple application for consent to alterations to spin off into a monster of a legal dispute. Part of the problem stems from the ad hoc, unsystematic manner in which applications are both made and processed. Other issues arise because parties are unaware of the legal complexities and requirements stemming from the obligations under the lease.
It is to address such situations that the protocol for applications for consent to carry out alterations (the alterations protocol) has been developed. It is designed to facilitate the smooth and speedy resolution of applications by tenants for consent to carry out alterations to their leasehold premises.
Along with its sister resource, the protocol for applications for consent to assign or sublet (the alienation protocol), it has been formulated as a joint initiative between Falcon Chambers and Hogan Lovells.
The alterations protocol will be of obvious interest and utility to practitioners advising tenants and landlords alike as it provides a series of practical steps that parties can take. Consistent with the spirit of the pre-action protocols under the Civil Procedure Rules, the intention is to improve communication, aid the early identification of issues, avoid the costly escalation of disagreements over process, and resolve any substantive disputes swiftly, through alternative dispute resolution where possible.
Scope of the protocol
The alterations protocol (which applies to property located in England and Wales) is divided into six parts: the first part explains the scope and aim of the protocol, and the remaining parts set out best practice guidance under the following headings:
The application for consent: the tenant should ensure that the application is sufficiently detailed at the outset to enable the landlord to understand precisely what is sought. Ideally the application should form a single package which, among other things, describes the works, enclosing plans, drawings, and specifications where appropriate; identifies whether the works fall inside or out of the demise, and are structural or non-structural; and refers to the material lease terms;
The landlord’s response to the application: key to achieving the aims of the protocol is the provision of a model timetable for the consideration and determination of applications. To that end, the landlord is enjoined within five working days of receipt of the application to confirm receipt and inform the tenant whether the application contains sufficient information for a decision to be made. The landlord’s detailed response should follow within a reasonable time thereafter (or within any timeframe required by the lease), and should itself be sufficiently detailed to enable the tenant to understand the landlord’s position, in particular whether consent is given, and if so whether subject to any conditions, and if not the basis on which it is withheld;
Costs of applications: leases commonly provide that the tenant foots the bill for reasonable and proper costs incurred by the landlord in responding to an application. To this end, the tenant should offer an undertaking to meet such costs at the outset, or the parties should seek to agree such a payment thereafter, specifying the scope of any undertaking and notifying each other promptly of any dispute;
Dispute resolution: consonant with modern practice, the parties are encouraged to consider alternative dispute resolution before referring any dispute to the court; and
Matters following the grant of consent: the parties should ensure the application and the landlord’s response are properly recorded, and consider ancillary issues – in particular, whether permitted alterations are to be taken into account upon rent review, and whether the tenant will be obliged to reinstate at lease end and/or be entitled to compensation for improvements.
Every application will be highly fact-sensitive and must be properly assessed, with the aid of professional advice where possible, at the time it is made.
It is anticipated that the alterations protocol will become an essential tool for the prevention and management of disputes. The protocols may be embedded directly into dispute resolution agreements and in leases themselves, to be applied by courts and arbitrators. In this way, what is now seen as best practice could soon become standard procedure, providing a framework for processing applications, against which the actions (or omissions) of parties may be measured.