Commercial Lease Obligations

Licence to Alter — Commercial Lease Consent to Alterations UK

Commercial lease alterations covenant: absolute (landlord has complete discretion to refuse); qualified (consent required — s.19(2) LTA 1927 applies to improvements; consent cannot be unreasonably withheld; landlord can require reinstatement, compensation for diminution, payment of costs); fully qualified (RICS recommended). LTA 1927 ss.1-3: tenant's right to compensation for improvements at lease end; s.3 notice procedure; compensation capped at lesser of net addition to letting value or reasonable cost. Licence to alter deed: description of works; conditions; reinstatement obligation; building regulations; planning. Scotland: no LTA 1927 equivalent; courts apply reasonableness test to qualified consent provisions.

10 min readUpdated 7 June 2026Last reviewed: 17 May 2026licence-to-altercommercial-leasealterationsimprovements

Types of Alterations Covenant

Absolute covenant: landlord has complete discretion to refuse — no statutory override. Qualified covenant: consent required; s.19(2) LTA 1927 applies to 'improvements' — consent cannot be unreasonably withheld. Fully qualified covenant: consent not unreasonably withheld — RICS recommended standard. What is an 'improvement': works that improve the premises from tenant's perspective (Woolworth v Lambert [1937]) — even if they reduce landlord's reversion value. Decorative/cosmetic works typically not 'improvements' — s.19(2) may not apply.

Section 19(2) LTA 1927

Qualified covenant against improvements: landlord cannot unreasonably withhold consent. Landlord may impose reasonable conditions: payment of landlord's legal/surveying costs; compensation for diminution in value of premises or adjoining property; reinstatement obligation at lease end. Reinstatement as condition: landlord can require removal of alterations at lease end — important to record in the licence. Lambert v FW Woolworth [1938]: reasonableness depends on nature of works, impact on premises, and landlord's legitimate interests. Respond within reasonable time — unreasonable delay may be treated as refusal.

Licence to Alter Contents

Formal deed of consent: identify works precisely by reference to approved drawings and specifications annexed; conditions (architect supervision; structural engineer sign-off; building regulations; planning permission; insurance during works); reinstatement — specify clearly whether tenant must reinstate and what to remove; right to inspect progress; final approval of completed works. Execute as deed by both parties. Note on landlord's registered title at HM Land Registry. SDLT: licence itself not SDLT-able; but premium payments for consent require SDLT analysis.

LTA 1927 ss.1-3 — Tenant Compensation for Improvements

LTA 1927 s.3: tenant serves formal notice of intention to make improvements; landlord has 3 months to object or consent; failure to object within 3 months deems authorisation. LTA 1927 s.1: compensation at lease end for authorised improvements that added to letting value; claim must be made in prescribed form and time. Cap: lesser of net addition to letting value or reasonable cost of works. Notice procedure essential: failure to follow s.3 procedure loses s.1 right even if landlord consented via licence to alter. Many modern leases exclude s.1-s.3 regime expressly.

Reinstatement and Scotland

Reinstatement in dilapidations: failure to reinstate per licence is part of terminal dilapidations claim; s.18(1) LTA 1927 diminution and supersession caps apply. Pre-let agreement: landlords planning redevelopment may waive reinstatement in advance. Scotland: no equivalent to LTA 1927 ss.1-3 (compensation for improvements) or s.19(2). Courts apply reasonableness to qualified consent provisions under Scots law. Scottish tenants must negotiate improvement compensation rights expressly in the lease.

Frequently asked questions

Can a commercial landlord refuse consent to alterations?+

It depends on the lease covenant. Under an absolute covenant: yes — landlord has complete discretion. Under a qualified covenant: for 'improvements', Section 19(2) LTA 1927 provides that consent cannot be unreasonably withheld. The landlord may impose reasonable conditions including reinstatement and payment of costs.

What conditions can a landlord attach to a licence to alter?+

Under Section 19(2) LTA 1927, for qualified covenants restricting improvements, the landlord can require: payment of their legal/surveying costs; compensation for diminution in value of the premises or adjoining property; and an obligation to reinstate the premises at the end of the lease. These conditions must be reasonable.

Is a tenant entitled to compensation for improvements at the end of a commercial lease?+

Potentially yes — under LTA 1927 ss.1-3, if the tenant followed the formal s.3 notice procedure (served notice; no landlord objection within 3 months), the improvement added to letting value, and the claim is made in time. Compensation is capped at the lesser of the net addition to letting value or reasonable cost. Many modern leases expressly exclude this right.

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