BUILT ENVIRONMENT JOURNAL

How to process licences to alter

Surveyors can play a significant role when tenants apply for licences to alter their premises. What does this process involve?

Author:

  • Stephen Ball MRICS

17 March 2022

Aerial shot of men working at desk with plans and surveying tools

As building surveyors, we may be familiar with the idea that tenants in commercial properties who wish to alter their demised premises will need to enter into a legal agreement.

Dealing with applications

The first stage in the process is that the tenant applies to the landlord or managing agent to carry out alteration work.

While the landlord should pay due regard to the tenant's requirements for fit-out works, they also need to give the proposals proper scrutiny. This will safeguard the asset against ill-considered work, which may have a detrimental impact on the fabric itself or on any other tenants.

Whether or not a licence to alter is required depends on the wording of the lease, and this should be the first point of reference. Generally speaking, minor non-structural works – such as decoration or cosmetic fit-out, or installing or moving demountable partitioning – are permitted without a licence.

However, just because works seem straightforward does not always mean that a licence is not required. As an example, if partition alterations affect equipment or systems such as fire alarms or sprinklers then a licence of some form may be necessary.

Surveyors conduct technical review

A building surveyor appointed by the landlord to conduct a technical review of an application will usually be presented with a set of plans and drawings from the tenant. This allows them to gauge the complexity of the proposed work and provide the landlord with a quotation for their fee.

Where input from other consultants is needed, such as structural or mechanical and electrical engineers, their fees should also be requested. The building surveyor may often serve as lead consultant in gathering this information, coordinating other consultants throughout the process and acting as a central point of contact for landlord and tenant.

At the outset, surveyors will need to know who is responsible for all professional costs associated with the licence review and documentation. As a rule of thumb, where an incoming tenant proposes changes as part of a new letting each side usually bears their own professional costs. For tenant alterations as part of an existing lease, the landlord's professional fees for any licence review are usually paid by that tenant.

The lease should always provide clarity on cost liability. Where fees are payable by the tenant, surveyors should seek a commitment to pay the fee from them, or their solicitors, at the outset.

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Typical tenant works in progress

Typical tenant fit-out works in progress: when ceilings are exposed, this is a good opportunity to inspect areas that would normally be hidden from view © Savills

Assessing information supplied by tenants

The information describing the work provided by the tenant or their advisers is often of varying quality. It is not uncommon for information to be missing or irrelevant documents included. The surveyor will need to make a judgement as to what supporting documents are required on a case-by-case basis.

What a licence to alter application should include is clear drawings showing the existing building and the extent of the proposed works; specification documents describing these works; and evidence of statutory consent such as a planning approval or a building control plans check. This is not an exhaustive list, though, and each application will have its own specific requirements.

The surveyor must ensure that the tenant complies with relevant health and safety legislation, such as the CDM Regulations 2015 and the Control of Asbestos Regulations 2012. Surveyors should also check that the tenant's contractor has provided suitable risk assessments and method statements for works that require permits, such as those in common parts of buildings with multiple tenants.

A key stakeholder in the licence review process is the building insurer. Insurers may have specific requirements on minimum levels of contractor cover, and may also wish to review any alterations to life safety systems such as sprinklers or fire alarms separately. Works should not commence until the building insurer has been notified and confirmed that works may proceed. The managing agent often notifies the building insurer; however, the building surveyor should ensure that this communication has taken place.

The drawings and details attached to a licence may well become material considerations at the end of the tenant's lease term when dilapidations are being considered. A building surveyor should therefore advise the tenant as soon as possible whether any necessary information has not been provided.

Communicating with the tenant and managing expectations is more generally key to the surveyor's role. From the outset, it is important to understand the tenant's desired programme and be clear about how realistic this is. The surveyor should ensure they do not unduly delay the process and become a source of frustration to landlord and tenant. However, the surveyor themselves should not be pushed into agreeing to review proposals in too short a time either.

'The information describing the work provided by the tenant or their advisers is often of varying quality'
Structural tenant fit-out works in progress

Where structural works are proposed, these should be reviewed and checked by a structural engineer as part of application for a licence to alter © Savills

Reviewing the licence

The licence review stage focuses on analysing the tenant's proposals, identifying queries and liaising with them or their professional team to resolve them. For more complex licences, a surveyor may wish to visit the site as part of the desktop review as well, so they can better understand the proposals.

A tracker document can help to schedule queries. This will be exchanged between parties until all queries are resolved. At this point the surveyor can then formalise their recommendation to the landlord to approve the works in principle, often setting certain conditions as well.

This will be accompanied by an approved set of drawings and details. The format and specifics of this process as well as the timing of the execution of the licence – and thus when the works can actually commence – will often depend on landlord requirements, and will be influenced by input from their solicitors.

Monitoring works on site

To ensure that the works progress as per the approved details, the surveyor then conducts site monitoring. They should also check that any licence conditions are being followed.

Landlords may have concerns over certain elements of the works; a typical example would be tenant connections to closed-loop water systems in a multi-tenanted building. In this case, the role of the surveyor might be to coordinate between the tenant, building management and landlord specialist consultants to ensure agreed protocols are followed.

The frequency of site inspection will depend on the complexity of the works, tenant programme and client requirements. However, roughly every four to six weeks is usual. Following each visit, surveyors should report to clients in an agreed format.

It is important to schedule visits to coincide with milestones in the fit-out programme, such as mechanical alterations above the ceiling. Once this space is covered up, it will be difficult to ascertain whether works have been undertaken in accordance with agreed principles.

Reviewing completion documentation

After the works have finished, the final stage is for the surveyor to review completion documentation.

This is usually presented in an operations and maintenance manual that should contain as-built drawings and evidence of statutory compliance, as well as certification of mechanical and electrical testing, life safety testing, commissioning and completion. The surveyor should review this and report to the client that the correct documentation has been provided and the licence review has been closed out.

Licence review work is particularly important to ensure landlords' interests are protected and their assets are not compromised. Building surveyors are key to this process because they ensure that any work is properly considered, reviewed, monitored and documented. Surveyors looking for a comprehensive guide should refer to the current edition of Licence for alterations in commercial property, RICS guidance note.

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