Improvements & Additions to Business Premises

Note: What follows on this and other pages constitutes information on the firm as it existed immediately prior to 21st August 2012.

1.    Introduction

Leasehold ownership of property in England is remarkably prevalent. For well-known reasons – the unenforceability of repairing duties between freeholders and the scarcity so far of the new alternative, commonhold - many homes are owned under a leasehold title, particularly flats and maisonettes.

Businesses typically occupy leasehold premises at a market rent – also known as a rack rent – for the same reason and also for ease of financing.  

Leases involve apportioning various rights and duties between the landlord and tenant.   When leasehold premises are altered a lot of law comes into play.  These notes are a summary of the typical legal issues that arise from alterations and improvements to leasehold premises, dealing with the general law for all types of leasehold property and with particular rules which only apply to certain types of commercial property.

These notes contain general guidance only and are not intended to be relied upon in specific situations. Any one needs advice and representation over the types of questions explained here should seek advice from a solicitor.

2.    Boundaries, lease, title and contract  

A tenant’s right to make changes or enlargements to premises will depend on particular facts, such as the lease’s wording, the nature of the alterations envisaged, and the position of the landlord and neighbours.  If the lease is of the “sub-” variety, i.e. it was granted by an existing lessee or tenant, then the bureaucracy and expenses discussed here are likely to be increased by the necessary involvement of the superior landlord.

Sometimes a lease can be read as implying an easement over the landlord’s retained space, enabling the tenant to build a structure in that space – although a formal consent may also be required in order to comply with lease covenants (see below). In Wong v. Beaumont Property Trust Limited  [1965] 1 QB 173 some cellars had been let for use as a restaurant. The tenant gave covenants in the lease to eliminate smells and to comply with health and safety regulations. The tenant could not lawfully carry out the restaurant use without installing a proper ventilation system, which meant building a structure partly on the landlord’s adjacent property. It was decided that the tenant had an easement of necessity to so intrude upon his landlord’s space with the new ventilation system, even though neither party had realised this when the lease was granted.

On the same basis, if the lease provides for the tenant to have a canopy and the only practicable place for it is outside the area of demise then the landlord has to put up with the canopy being attached to his retained parts.

Thus, while it is important to check the extent of the demised space, one must always read the lease as a whole document and ask what rights may be implied.

Where proposed improvements encroach into adjacent air-space owned by the landlord the landlord can often be persuaded by an appropriate offer of money or some other benefit to sell that space and to permit the works of extension. If the building is at least half residential, by internal floor areas, and it is self-contained and the other qualifying conditions are met under Part One of the Landlord and Tenant Act 1987 then an issue will arise as to whether the flats’ tenants - or qualifying ones, under that Act, to be precise - have a collective right of first refusal which would impede the sale of this space.

If the consideration is to be any thing other than cash – for example, if it is to be the carrying out of other improvements or repairs to the building - then the landlord should protect its position by making the grant conditional on prior completion of the consideration works. Otherwise it can be very difficult to enforce the consideration once the grant of additional space has been let go. It would, for example, be very clumsy to include a right of forfeiture and try to enforce it.

Having such consideration in the form of works also creates a building contract, to which the statutory regime for adjudication of disputes under section 108 of the Housing Grants Construction and Regeneration Act 1996 will apply.

The tenant’s adviser should also search for any relevant restrictive covenants against the registered title to the lease and to the landlord’s reversion.  Advice should also be taken regarding party walls, rights of light and the need for planning permission.  

3.    The consequences of committing trespass

If you commit trespass into someone else’s space you can be evicted by an injunction order.

Additionally  or alternatively – particularly if the encroachment is very small or there is some other equitable basis to deny the rightful owner an injunction such as delay, lack of “clean hands”, acquiescence or waiver – ordered to pay damages.  Those damages can be assessed on the equitable or “buy-out” basis because the wronged party has to be compensated for the loss of an opportunity to have sold the right.  Accordingly, they can be assessed as a reasonable proportion of the profit made from the trespass.  The tenant would have to pay for the space’s special value, based on what would have been negotiated in a hypothetical negotiation at the time of first trespass and taking into account all of the circumstances.  The compensation would be calculated either as a once and for all amount or as a percentage uplift in the rent due.  Expert valuation evidence may be called to assist the court concerning the price which the parties would have agreed for the right to build in the space.

Any tenant who so trespasses on their landlord’s land abutting or close to the demised premises is deemed to be bound in respect of that land by his lease duties unless there are specific circumstances that would show that the occupation is for the tenant’s benefit separately.  When this presumption applies the tenant becomes liable to vacate the additional land upon expiry of the lease and the land is treated as within the tenant’s repairing and user obligations and the occupation should also be taken into account upon rent reviews.  

4.    The consequences of carrying out prohibited alterations

Breach of a tenant’s prohibition against alterations renders the lease liable to be forfeited.  The landlord would need to serve a notice compliant with Section 146 of the Law of Property Act 1925 upon becoming aware of the breach of covenant and in the meantime cannot accept rent or do anything else to acknowledge the continuing lease; otherwise the right to forfeit would be waived – this being a “one-off” rather than a “continuing” breach of duty.  

The landlord can instead elect to affirm the lease and sue for specific performance of the prohibition that has been broken.  Alternatively, the landlord can sue for damages in lieu of such mandatory injunction and these would be calculated on the same equitable basis as applies regarding trespasses - see above.   

A landlord who seeks an injunction should take advice as to the need to apply for an interim injunction pending the trial - which would only be granted on condition that the landlord offers a cross-undertaking in damages.  In Mortimer v. Bailey [2004] EWCA Civ 1514 it was decided that a failure to apply for an interim injunction is not fatal to a claim for a final injunction. Rather it is only a matter to be borne in mind by the court alongside other relevant matters when exercising its discretion. The most important matters are that the claimant must have acted quickly and the defendant must have ignored complaints or, arguably, acted in knowledge of the infringement.

5.     Are the additions tenant’s chattels or tenant’s fixtures or landlord’s fixtures?

There are different legal consequences according to category of improvements.  Here are some examples of how the different categories apply:-

-    huts placed on the ground have been held to be a tenant’s chattels;

-    a petrol station canopy that is bolted into the ground is a tenant’s fixture, being specifically for the benefit of its business;

-    plant or machinery or storage tanks that are embedded into the ground by the tenant will also be tenant’s fixtures;

-    mezzanine floors and stairs in a warehouse or retail store constitute landlord’s fixtures, since they are for the benefit and improvement of the property rather than being specific to the tenant’s business.

Examples now of the legal consequences of those categories are as follows:-

-    a landlord cannot rely on its intention to demolish only a tenant’s chattels as a ground of objection to granting a renewal tenancy under “ground (f)” - see further below;

-    tenant’s fixtures can be removed by the tenant, provided that the tenant makes good any damage caused, although if they are left behind at the end of the tenancy they will cease to be recoverable and pass to the landlord – who may also be entitled to charge the tenant for the cost of their removal (depending on the wording of the lease);

-    tenant’s fixtures are saleable separately from the lease and their VAT treatment needs to be specially considered;

-    landlord’s fixtures become owned by the landlord once they are installed and so the tenant will need the landlord’s permission to alter or destroy them at any later date;

-    landlord’s fixtures will be taken into account when setting a new rent on review.

6.    Taxation considerations

If a tenant covenants to do improvements as a term of its contract or lease then the value of the works is treated as a premium and Stamp Duty Land Tax will be payable.

If the works are to be done by the tenant in consideration of a reverse premium payable by the landlord at the commencement of the lease then there is no question of the new Construction Industry Scheme becoming engaged - whereby a deduction for tax would need to be made by the landlord and then accounted for later between the parties and the Inland Revenue.  In other situations such payments (or credit against rent) between a landlord and tenant can trigger the operation of that Scheme and specific advice should be sought accordingly.  

Specialist tax advisers should be consulted about the deductibility of improvement costs as a trading expense and the possibility of claiming Capital Allowances.

7.    Implied prohibition under the law of “waste”

“Waste” is some act which alters the nature of the land. It has been described as a spoil or destruction to the injury of the reversion. The alteration must have a substantial effect and be detrimental to the reversion for example by removing boundary structure and so making it difficult to ascertain the boundary line, although it will always be a question of fact in each situation to show detriment. Examples of waste from the cases include dumping hard core and rubbish on land thereby raising its height by several feet and impeding redevelopment and knocking trough from a shop into an adjoining dwelling and thereby destroying the dwelling.  Failure to remove a tenant’s trade fixtures at the end of a lease term can amount to waste. The same conduct can also be seen as a breach of the tenant’s duty to treat premises in a good tenant-like manner.

Damages are assessed according to the diminution in value of the reversion.

Ameliorating waste, which improves the value of the reversion, is in practice not able to be stopped by a landlord – leaving aside questions of breach of covenant dealt with below.

8.    Actions prohibited or controlled by a lease’s wording

Sometimes a prohibition is against only structural alterations and other times it can cover both structural and non-structural ones.  A generally worded prohibition against any altering of premises can regulate both structural and non-structural changes.  The lease of course has to be construed as a whole and in the light of surrounding facts.

Alterations can also be in breach of a repairing duty, although the better view now is that this does not apply when the premises are in process of being rebuilt to a state of full repair.

9.    Different levels of prohibition which leases lay down

These can on their face be either absolute, or conditional on consent from the landlord or so conditional with provision hat such consent must not be unreasonably withheld. However, the lease wording is only the beginning of any consideration of the position as will be seen.

10.    The application to the landlord for consent to alterations

The application must be made before the works are carried out.  There is authority – Barrow v. Isaacs [1891] 1 QB 417 – that a tenant cannot retrospectively ask for permission to carry out works that have already been done. Accordingly it becomes in the landlord’s gift whether or not to consent to such works in those circumstances.  If the landlord declines to consent then it is open to him to take appropriate enforcement action, as summarised above.  Delay in bringing such enforcement proceedings can prejudice the landlord, regarding remedies which a court is likely to award.  Serious delay will confine the landlord to a remedy on damages only.  

The application must contain sufficient information to make clear to the landlord the extent of the proposed alterations and how they will impact upon the structure of the building: Iqbal v. Thakrar [2004] EWCA Civ 592, [2004] 36 EG 122.

While it could be argued that a tenant who has a right to make certain alterations – for example, in order to implement an implied easement for ventilation – has no need to apply for a formal licence under lease restrictions, that would be a risky stance to take. At the least such alterations should be prior notified in correspondence, especially when the works will involve some entry upon the landlord’s adjacent space.  It is correct to seek a licence, regardless that there may be a strong element of right to make them; the licence process enables the landlord to regulate the detail of the works. Going ahead and taking the landlord by surprise will precipitate a hostile response and unnecessary costs.

Making prohibited alterations without the necessary consent amounts to a breach of lease covenant of the “once-and-for-all” variety that thereby puts the landlord (once he knows of it) to an election whether to take forfeiture action or not. It is arguable for tenants, in any situation where proposed improvements have been started prematurely, that even a request from the landlord for further information as to the proposed improvements can amount to a waiver of the right to forfeit.

11.    The granting of consent

Some leases require this to be under deed.  Otherwise any writing will suffice.  Landlords and their advisors have to be careful in correspondence arising from any application.  Granting consent “subject to contract” or “subject to licence” has been held to be effective as a full consent regardless of those words - in that this is a unilateral action.  The safe course is to say that consent is conditional on the tenant entering into specific covenants set out in an enclosed document - assuming that those covenants are appropriate; see below.  

12.    Challenging a refusal of consent

The safest course is to sue for an appropriate declaration and order requiring the landlord to issue the consent. The burden of persuasion, to show unreasonableness, lies on the tenant. This burden must surely be easier to discharge while the events are current, in preference to having to visit the same question years later in the context of some issue over, say, waiver of covenant or a rent review (see below).

There is no remedy in damages for the tenant’s loss during any period of wrongful withholding of consent.   (In the context of applications for other types of licences pursuant to leases - i.e. for permission to assign, underlet, charge and to part with possession - a right to claim compensation has only existed as a result of the Landlord and Tenant Act 1988, which does not apply here.)

Having said that, the law probably allows a tenant to go ahead and carry out works when faced with an unreasonable refusal.

13.    Absolute prohibitions and ways round them

An absolute bar, on its face, prohibits the tenant from carrying out any works whatsoever.  However, alterations or improvements can still be possible in spite of this.  First, there is the category of works necessary in order to comply with a statutory duty and bear in mind also that most leases expressly require tenants to comply with all statutes. Examples include providing a means of escape in case of fire pursuant to the Regulatory Reform (Fire Safety) Order 2005 or providing access for disabled persons as required by the Disability Discrimination Act 1995 – commented upon further below.  In these cases of statutory duty to improve the tenant must first give the landlord a notice of intention to carry out the works under Section 48 of the Landlord and Tenant Act 1954.

A second way around an absolute prohibition – applicable only for most commercial premises - is provided by section 3 of the Landlord and Tenant Act 1927.  This section enables a commercial tenant to serve a notice stating its intention to carry out improvements, together with a specification and plan.  If the landlord serves a notice of objection within three months the tenant can apply to a court and if the proposed improvements meet certain criteria the court may certify that they can be done.  Those criteria are that: -

(i)    the improvements would add to the letting value of the premises at the end of the lease term,

(ii)    the improvements are reasonable and suitable to the character of the premises, and

(iii)    the improvements would not diminish the value of other property belonging to the landlord.

The court will issue a certificate upon being satisfied of those matters.

The court may alter the specification and plan.

However, section 3 also gives the landlord the right within three months to call in the works and do them itself in return for a reasonable increase in the rent, to be certified by the court if not agreed.  A tenant can change its mind and resile from the proposed improvements if the landlord decides to exercise this right: Norfolk Capital Group Limited v. Cadogan Estates Limited [2004] 3 All ER 889  There are of course strict time limits and rules for service of documents under this law, upon which each party will need expert guidance.

In summary, an absolute prohibition may not actually prevent the tenant from altering the premises but it will enable a landlord who acts astutely and has the money to do the works itself to rentalise the value of those works.  In situations where the tenant’s increase in business turnover and profit arising from the alterations will be great, such as the addition of new storeys to a car park, this exercise of rights by the landlord can have the effect of multiplying the rent payable.  (Another way for a landlord to capture benefit that results from expansion of the tenant’s business facilitated by works of enlargement would be to impose a turnover rent from the beginning of the lease.)

Any tenant whose landlord elects to carry out the works of improvement under this procedure should seek to ensure that the landlord makes a VAT election before doing so.  Otherwise the VAT paid in respect of the works will not be recoverable by the landlord and will in effect inflate by 17.5% the capital cost of works that is to be rentalised and charged to the tenant.  

14.    Mandatory improvements under the Disability Discrimination
Act 1995

This Act lays down that where any “physical feature” of premises makes it impossible or unreasonably difficult for disabled persons to make us of a service (such as that of a shop or an office) the provider of the service - who will in these instances be the occupying tenant - must take whatever steps are reasonable in all the circumstances to remove that feature or alter it or provide a reasonable means of avoiding it or provide a reasonable alternative method of making the service available to disabled persons.  “Physical feature” is widely defined to cover things such as stairs, barriers, fixtures, surfaces, uneven paths and the like.

Under Section 24D of the above Act and its regulations it is deemed to be reasonable for the controller of let premises (i.e. the occupying tenant) to apply to another person (i.e. their landlord) for a change in the terms of letting for the removal of such an obstacle.  Accordingly, a tenant is under a duty to apply to its landlord for consent to alter premises where necessary for making an appropriate modification.  

15.     Mandatory improvements under the Regulatory Reform (Fire Safety) Order 2005

Leases may be drafted now to require the tenant to put up a united front with the landlord in dealings with regulatory authorities over alterations. It is likely though that both tenants’ and landlords’ hands will be tied when the enforcing authority intervenes and requires alterations to be made. See further below.

16.    Qualified prohibitions and the landlord’s duty to be reasonable

One of these covenants states that the tenant can carry out work only with the prior written consent of the landlord.  In so far as the proposed alterations amount to improvements when looked at from the tenant’s position Section 19(2) of the Landlord and Tenant Act 1927 will apply so that the landlord cannot unreasonably withhold consent.  A formal application should of course be submitted, accompanied by three sets of relevant drawings and specification.  

A qualified prohibition enables the tenant to make potentially far-reaching enhancements to the value of its premises - such as building additional storeys that may multiply the amount of accommodation provided - without paying any additional rent.  

As there is a duty not to act unreasonably, learning from the case law under licences to assign and the Landlord and Tenant Act 1988 can be applied here.  Accordingly, the landlord can first demand security for its reasonable legal and other expenses to be incurred in the application and must then reach a decision within a reasonable time – which varies according to the circumstances but in the typical case will be about 28 days.  Where there is such a duty on the landlord to act reasonably and the landlord withholds consent to improvements then the burden rests on the tenant to show in court that consent has been withheld unreasonably: F W Woolworth & Co v. Lambert [1937] 2 All ER 1525.  

Any modified use of the premises resulting from the alterations will be a relevant matter; a landlord has the right to refuse such consent in order to protect its current trading activities on neighbouring premises, where reasonable, and there is case law concerning this right that must be carefully considered in each case.  If the alteration diminishes the letting value of the premises the landlord can require a covenant to reinstate the premises to their former condition at the end of the lease term.  

Alterations to facilitate disabled access will generally be very difficult for any landlord to resist, in view of the Disability Discrimination Act 1995.  The outcome would depend on the damage if any to the landlord’s reversion, weighed against the alternative of such access being created.

The landlord may also seek reasonable compensation if the proposed amendments will diminish the value of its reversion or any adjacent premises that it owns and its costs.

The RICS’s Code for Leasing Business Premises recommends (since it only has voluntary effect) that landlords refrain from requiring permitted alterations to be removed at the end of a lease term unless such removal is reasonable.  It also calls for landlords to agree to give tenants notice at least six months before the lease term expires of any works of reinstatement to be carried out.  Though not binding, these provisions are useful to use in arguments - both in commercial negotiations and in litigation.  

In practice, landlords tend to require a covenant for reinstatement of premises to their original state as a means of avoiding tenants’ statutory right to compensation for improvements at the expiry of lease.  

If the works are sufficiently large so as to involve the person carrying them out to keep a health and safety plan and file under the Construction (Design and Management) Regulations 2007 - see below - then the landlord can require as a condition of licence that a copy of the resulting documents must be handed over on completion of the works.  Moreover, the landlord may request a copyright licence to reproduce further copies of the documents comprising that plan and file, for its own use or for the benefit of future users of the premises after the present tenant has gone.  This copyright point needs to be covered in the tenant’s dealings with its design team of architects, service engineers, electrical engineers, etc.

In a complicated case the landlord may even demand to benefit from any collateral warranties as well.

The improvements will need to be notified to the building’s insurers, with provision for the tenant to reimburse any additional premium.

17.    Statutory compensation for improvements

The Landlord and Tenant Acts 1927 and 1954 give tenants of commercial premises the right to claim compensation at the end of the lease term for any improvements voluntarily made.  This only applies to authorised improvements which have added to the letting value of the property and not to anything which a tenant can remove, i.e. trade or other tenant’s fixtures.

To be authorised, the tenant must have originally served upon the landlord a notice indicating that it intends to carry out certain works of improvement and referring specifically to the 1927 Act, as already covered above.  The above court procedure has to be followed by the tenant, who must comply with any conditions fixed by the court and complete the works within a time-table agreed with the landlord or fixed by the court. The tenant can require a certificate of compliance from the landlord and sue for this if it is refused.

An improvement made by a tenant in pursuance of a contract for valuable consideration, such as a rent free period or a building lease, does not qualify for this compensation.

The compensation amount to be paid must not be greater than the net additional value to the premises caused by the improvements or, alternatively, the reasonable costs of carrying out the improvements as at the termination of lease.  Regard should be had to any proposal for change of use, demolition or structural alteration of the premises.

Landlords can avoid this compensation liability by ensuring that the lease and any licence for alterations require reinstatement of the premises to their original state at the end of the term.  It also assists a landlord in this situation if the lease is excluded from the Landlord and Tenant Act 1954, assuming that the tenant wishes to renew the lease.

If the landlord has served a notice under Section 25 of the 1954 Act to end a lease, the tenant must apply to the Court for this compensation within three months of receipt of that notice.  If the tenant has served a Section 26 notice to end its lease under the Act then the date for claiming such compensation is within three months of the landlord’s notice of objection in reply.  In case the lease ends by simply expiring, such as where the tenant vacates on the term date without following the 1954 Act procedures, the claim must be made within the penultimate three months of the lease term.  If the lease ends by forfeiture the limitation date is three months after the date of the court’s order for possession or the act of re-entry if possession was taken by that self-help method.

The landlord’s liability to pay such compensation cannot be excluded by any wording in a lease, unless the court finds that the consideration paid for the exclusion was adequate.  

18.    The effect of improvements on rent reviews

Improvements can be either considered or disregarded on a rent review, depending upon the relevant clause in the lease.  The right to improve, if it exists, is always to be rentalised, just as presumably it was in the open market when the lease was first granted. Improvements are things, not rights. Where they are disregarded the tribunal or adjudicator - be it an expert or an arbitrator - will look at the unimproved premises with the right to improve.

A landlord cannot unilaterally create an increase in the rental value by waiving a prohibition or announcing that it consents to improvements, unasked by the tenant.

A rent review clause may specifically give guidance as to how improvements affect the new rent to be set. A requirement that works must have received the landlord’s prior written consent will be strictly enforced; however, the tenant can defeat this by showing such consent to have been unreasonably withheld.

Where the clause states that the new rent is to be “a reasonable rent for the premises” this has been held in two House of Lords cases to mean a full rent including the value of tenant’s improvements and regardless of who paid for them. See Ponsford v. HMS Aerosols Limited [1979] AC 63 and Cuff v. J&F Stone Property Co Limited [1979] AC 87.  Thus, if there is no express disregard for improvements they are to be rentalised.

On the other hand, where a rent review clause stated that the new rent was to be “a rent which would be reasonable for the tenant to pay” this has been interpreted to mean that tenant’s own improvements are disregarded, in English Exporters (London) Limited v. Eldonwall Limited [1973] Ch 415.

Where improvements cover an element of repair the two strands have to be separated out in value terms, with the premises being deemed to have been repaired to their required standard: Gibson Investments Limited v. Chesterton Plc (No 2) [2003] EWHC 1255.

In a renewal of lease situation, under the Landlord and Tenant Act 1954, the tenant should ensure that any new rent review clause contains a disregard for voluntary improvements made during the preceding lease term or terms - as this is a part of the Act’s basis for evaluating the new rent upon renewal.

19.    Their effect on lease renewal proceedings

During the final year of any lease that is protected under the Landlord and Tenant Act 1954 the landlord can raise certain grounds to try and prevent the tenant from obtaining a renewal lease.  The tenant can put the landlord to proof of any ground of objection in Court proceedings under the Act.

A commonly-used ground of objection to renewal is that the landlord intends to demolish or to reconstruct the tenant’s premises or a substantial part of them.  This is known as “ground (f)” and to prove it a landlord needs generally to produce its planning permission (or proof that planning permission is obtainable) and evidence of its progress towards entering into a contract with builders and to show that it has available the necessary funds or funding.

Continuity at the same premises can be vitally important to a tenant who has a successful local business or who would incur large costs in moving.  The amount of compensation that the Act requires a landlord to pay upon successfully resisting a lease renewal can be a mere pittance compared to the tenant’s loss.

A tenant who plans ahead thoroughly can sometimes assert its above rights to carry out improvements as a way to pre-empt its landlord’s reliance upon ground (f).  A tenant can even commandeer a planning permission obtained by its landlord by implementing that planning permission in its own scheme of improvements, leaving nothing for the landlord to intend to do under ground (f).  Whether this tactic can work in any particular case will always depend upon the specific facts.  It would not work, for example, where the landlord intends to merge the tenant’s premises with some adjoining ones.  Any solicitor advising on the use of this tactic has to proceed with great caution with regard to the drafting and timing of notices and applications for consents.  There would be substantial costs involved and the Court may make an award of costs at the end of the case in favour of the successful party.

When the Court fixes the rent for a statutory renewal lease it must disregard any improvements made voluntarily by the tenant or its predecessor in title during the preceding lease term or during the 21 years leading up to the date of the lease renewal claim.  The existence and history of any such improvements are of course matters for the tenant to prove in evidence.  It is therefore essential when acquiring business premises to establish full details about the history of any alterations.   Relevant sources of information that should be obtained and held securely with the original lease include:  schedules of works, plans, builders’ records, landlords’ and local authority consents, photographs, and decisions of any Court or arbitrator or expert surveyor.

20.    Design and safety aspects

Anyone making alterations to their premises must comply with the various Acts and Regulations that impose risks of legal liabilities over matters of design and safety.  Otherwise the consequences could be very expensive.  Compliance with these matters should be checked by a building surveyor, an architect or specialist consultant and any legal concerns referred to a solicitor.  

21.    The Regulatory Reform (Fire Safety) Order 2005

The tenant of any business premises will be “the responsible person” within the meaning of these regulations.  The responsible person is bound to take such general fire precautions as will ensure, so far as is reasonably practicable, the safety of any employees. In relation to other persons on the premises or in the immediate vicinity, the responsible person must take such general fire precautions as may reasonably be required to ensure that the premises are safe. The regulations require a risk assessment to be carried out in a particular way that may identify preventive and protective measures and records to be kept. A landlord which receives a rack rent has responsibilities under these regulations as an “owner” - in particular to co-operate with the tenant for the purpose of safeguarding safety of persons on the premises and in the immediate vicinity and particularly regarding any common parts.

The relevant enforcing authority under these regulations, which can be a fire and rescue authority, the Health and Safety Executive or a local authority can give the tenant an alterations notice if they are of the opinion that the premises constitute a serious risk or may constitute one if a change is made to them or to their use.  Such notice must specify the matters which constitute that risk. The tenant then becomes bound to notify the enforcing authority before making any change in the premises or their services, fittings or equipment or in the quantities of dangerous substances on the premises or in the use of the premises, and additional record-keeping requirements can also be imposed.

Specific changes to premises can be mandated by an enforcement notice under these regulations, or by a prohibition notice. Subject to rights of appeal, failure to obey any of those notices can result in prosecution.
Other relevant design and safety matters include:-

-    compliance with the Building Regulations 2000;

-    the duty to manage asbestos in non-domestic premises which includes establishing whether they contain asbestos, assessing the risk of any release of fibres, making a plan to manage the risk and carrying that out;

-    carrying out regular inspections to check that safe asbestos has not deteriorated and passing on relevant information to other users of the premises, which means keeping records;

-    making reasonable adjustments to premises to provide access for disabled staff and visitors.

Businesses now must proactively identify and carry out reasonable adjustments to their premises in anticipation of the needs of the disabled.  Guidance on choices between the possible measures that can be put in place is published by the Disability Rights Commission.  English Heritage has published its own special guidance: “Easy Access to Historic Buildings”.  Full records should be kept concerning compliance with these duties in case of a challenge by any interested party.

The law of building contracts may need to be considered, but it is beyond the scope of these notes.

22.    Damage and nuisance to neighbours

The law does not stand in the way of building works, as a general rule:  provided they are done responsibly they are treated as a reasonable use of property.  

Small acts of damage caused by builders to neighbouring owners are the responsibility of the builder, not the builder’s employer.  However, where the damage arises due to the extra hazardous nature of the work or due to the inevitable nature of that work to cause damage – such as subsidence or cracking caused by excavation or extra loading or by the use of kangos for breaking and demolition – the builder’s employer is liable.  

Water damage to premises below gives rise to a legal liability only where there is negligence unless the premises below have no water supply – in which case liability is strict (i.e. not dependent on showing fault).

The installation of ovens, ducts from kitchens or laundries and the like, or of air-conditioning plant and other items that continuously cause noise, vibrations, heat or smells is a fraught area, usually governed by three sources of law. First the relevant lease clauses, secondly the common law of nuisance, and thirdly by planning control if they affect the external volume of premises or the uses of premises.  Expert advice and representation is essential in each case from the planning stage onwards.

23.    Licensed premises

Alterations in the lay-out of pub or restaurant premises will automatically revoke a liquor licence if they have not previously been permitted by the licensing authority.

24.    Reinstatement of premises at the end of the lease term

The lease or a licence to alter may contain a tenant’s covenant to reinstate the premises back to how they stood originally.  This may expressly require such reinstatement to be completed prior to the term date of lease.  It may alternatively provide for the landlord to give the tenant a notice requiring the alteration to be reinstated.  Such a notice can be served any time during the lease term and even on the last day.  

Unless the lease says otherwise, such works have to be done within a reasonable period.  If that is construed to go beyond the lease’s term date the tenant can have extra time in the premises to stay and do the necessary works, upon paying mesne profits: Scottish Mutual Assurance Society v. British Telecom plc (unreported).  The tenant must show that it has started the works as soon as reasonably possible, in order to be entitled to such extra time.  
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A list of directors is available for inspection at our registered office at 116-118 Chancery Lane, London, WC2A 1PP
Authorised and regulated by the Solicitors Regulation Authority | SRA No. 426622
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