Licence to Alter Cost

Who pays for a licence to alter

The tenant pays. Almost every commercial lease requires the tenant to meet the professional costs of the landlord in dealing with an application for consent, and to give a written undertaking for those costs before the application is considered.

Where a superior landlord is involved, the tenant normally meets that set of fees as well. In central London office buildings held on long headleases this is common, and it can double the legal cost. The tenant should establish at the outset whether a superior consent is required, because it affects both the cost and the programme.

The undertaking usually survives withdrawal. A tenant who applies for consent and then abandons the works remains liable for the costs incurred to that point. Applications should be made when the design is settled, not to test the reaction of the landlord.

Legal fees

Legal fees cover drafting or reviewing the deed, negotiating the terms, and registering the licence against the title where the lease is registered. On a single-landlord commercial licence, each side commonly charges between £750 and £2,500.

• Straightforward internal fit-out, single landlord — typically £750 to £1,500 per side.
• Superior landlord consent required — add a further set of fees, commonly £750 to £2,000.
• Works affecting structure, the exterior, or a listed building — higher, reflecting the additional conditions and consents.
• Registration at HM Land Registry — a modest additional cost, handled by the solicitors.

Surveying fees

Surveying fees cover the technical side of the consent. The work is carried out by Clayton Ayling, a chartered building surveyor regulated by RICS, and covers matters the legal drafting does not reach.

Fees follow the complexity of the assessment rather than the value of the works. A modest set of alterations that affects fire compartmentation, sprinkler layout, or landlord plant takes more assessment than a larger fit-out that touches none of them.

Recording the condition before the works begin is a separate and worthwhile item. It is priced by area and takes a day on most office suites. Without it the tenant has no evidence of the starting position when the reinstatement demand arrives. The approach is set out in the office schedule of condition guide.

The premium

A premium is a payment to the landlord for granting the consent, separate from any professional fees. It is not a standard feature of every licence and many commercial consents are granted without one.

A premium becomes more likely where the alterations affect the value or lettability of the premises, where the lease expressly reserves the right to charge one, or where the alterations clause makes consent a matter of landlord discretion rather than a qualified covenant. Where the covenant is qualified — consent not to be unreasonably withheld — a demand for a substantial premium may itself be unreasonable, depending on the circumstances.

Premiums are negotiated. There is no scale. The negotiating position of the tenant is strongest before the fit-out programme is committed and weakest once contractors are booked.

The cost that matters more than the fee

The professional fees are a few thousand pounds. The reinstatement obligation agreed in the same document is the figure that determines the real cost of the licence.

Stripping a fitted office floor back to base-build condition means removing partitioning, joinery, kitchenettes, supplementary cooling, structured cabling, and altered lighting, then making good ceilings, raised floors, and finishes. Priced by area and specification, this commonly reaches six figures on a full floor. On a small suite it still runs to tens of thousands of pounds.

That liability is created by a clause negotiated in a matter of weeks, often with the fit-out programme already under pressure. The difference between automatic reinstatement and reinstatement only on notice from the landlord is worth more than every fee in this guide combined. The mechanics are set out in office fit-out reinstatement, and the wider lease-end position in dilapidation costs.

Controlling the cost

The cost of a licence to alter is controlled at the application stage, not at the invoice stage.

• Ask for a written fee estimate from the landlord before giving the costs undertaking.
• Establish at the outset whether a superior landlord consent is required, so the full cost and programme are known.
• Submit a settled design. Repeated revisions to drawings generate repeated review fees on both sides.
• Prepare the drawings and specification to a standard the landlord can assess, rather than an outline layout that prompts queries.
• Apply once the design is fixed. An undertaking given on a speculative application still creates liability if the scheme is abandoned.
• Negotiate the reinstatement clause, because it carries more value than the fees.