Making sure a lease has appropriate flexibility to allow for building alterations…

As the year comes to a close, many businesses (and homeowners) think about what alterations and renovations they can make to premises over the summer break.

When commercial tenants are reassessing space needs for the coming year, it is an excellent time to look at adjusting premises to fit your staff profile.

In these times when budgets are being closely scrutinised, making do with fewer staff and less space is top of mind for many.

It is therefore really important that a commercial property lease allows enough flexibility for you to refit your premises without restriction from the landlord.

A typical lease often states that the landlord’s approval is required for any building alterations that you make. This can be used to severely disadvantage a tenant. Landlords can make a range of demands to their advantage including dictating which building contractors might carry out the work.

There is also the possibility that the landlord might delay your works and be unreasonable about the timeframe for giving their approval.

The key thing to ensure you are protected from an over-restrictive landlord is the word “reasonable”. This word needs to be inserted into contracts, particularly those with clauses concerning the landlord’s approval for alterations. Whether or not a landlord has been “reasonable” can be tested in court.

There is also the possibility of putting clauses into a lease that allow for alterations to a building to be automatically approved if a landlord does not respond within a given time period.

Other safeguards can be included such as a requirement for independent quotes if your landlord demands you use their contractors for work.

It’s all about ensuring there is a balance of power between landlord and tenant and that contracts are drawn up that ensure a landlord will act “reasonably” when you wish to alter your premises.