Reinstatement of alterations at the end of a lease: landlords beware

This case highlights the importance of determining who will be liable to pay for reinstatement and works carried out well before the end of term.

What happens at the end of a commercial property lease?

In commercial property, landlords will often require reinstatement of alterations and serve a terminal schedule of dilapidations for repair upon a tenant.

The importance of the South Essex case

The tenant made alterations to the carpet. This was permitted in the lease, and the landlord could require reinstatement of those alterations if it was reasonable to do so. 

The tenant wrote to the landlord advising them of alterations but never received a reply.

Generally, a landlord is under no obligation to reply unless stated in the lease (Fitzroy House Epworth Street (No 1) Ltd v FT Ltd [2006] EWCA Civ 329); However, in the absence of the landlord’s consent in South Essex, the tenant proceeded with the alterations.

Problems arose at the expiry of the lease as the parties were unable to reach an agreement on a figure for the tenant’s dilapidations liability.

What was the outcome, and why was it important?

The court held that the lease permitted the alteration. More problematically, the landlord had a qualified right to request the removal of the altered carpet before the end of term but had not exercised this. 

As a result, the tenant had not been in breach of covenant in relation to the carpet. The lease was also silent on the landlord’s fittings (or chattels). This enabled the tenant to alter the landlord’s fixtures without his consent effectively. The lease drafting and lack of response had, in this instance, been to the detriment of the landlord.

Action to take when ending your lease

To prevent a landlord from being stuck with a tenant’s alterations at the end of term, it is important to ensure:

• The lease is well-drafted and requires reinstatement and the right for consent to all minor or other alterations

• Clear wording as to what constitutes the landlord’s fittings and chattels so that they cannot be altered by the tenant without consent.

• The inclusion of a refurbishment specification will easily avoid the need for disputes and trials.

Expert legal advice on commercial property leases

SO Legal has commercial property solicitors based in London, Brighton and East Sussex and works with clients across the UK.