Non-Structural Alterations

23/05/2025

May 2025 – For pre-contract enquiries, nowadays known as Commercial Property Standard Enquiries, “CPSE” for short, any temptation to answer most with ‘no’, or ‘not known’, or ‘not aware of’, is bound to be a waste of time. The person enquiring is sure to query anything that should be answered more fully.

The information about the property that the seller or landlord is expected to know can be daunting. Some questions are so technical as to be unintelligible for the inexperienced.

One such enquiry that can be difficult if not impossible to answer is whether any non-structural alterations have been done to the property. If the landlord has done any, then answering should be straightforward. But what if the previous tenant, or the existing tenant if the new lease is to be granted on simultaneous surrender of the existing lease, did the work without needing the landlord’s consent, as many leases allow? And what if the existing tenant is an assignee of the previous tenant? Would the previous tenant have had to tell the existing tenant?

Where alterations are carried out by a tenant, not in pursuance of an obligation to the landlord, any effect on rent of the alteration (improvements) will often be disregarded for the rent review, depending upon the wording in the lease. On renewal of the lease, it is essential that, for the rent review in the renewal lease, the review expressly disregards the improvements under the previous lease, failing which the alterations become part of the demised premises for the renewal lease – Brett v Brett Essex Golf Club 1986; Panther Shop Investments Ltd v Keith Pople Ltd 1987.

Unlike for agricultural property, which includes intangibles, there is no definition of ‘improvements’ for commercial property. Generally, it is taken to mean a physical improvement. Non-structural alterations, also physical improvements, are not always inconsequential.

For example, where shop premises are fitted out as a takeaway hot food shop, a typical non-structural layout is a serving counter at the front of the shop with space between the shopfront and counter for customers to stand and perhaps sit at a table while waiting, and behind the counter, tiled non-structural walls for the kitchen, preparation areas, and staff. Not requiring the outgoing tenant to reinstate the premises before letting to a new tenant means that the layout previously becomes part of the demised premises under the new lease.

For that scenario, I acted for a tenant for whose rent review the landlord’s surveyor wanted to ignore the layout and zone the shop as if the non-structural walls were not there. I successfully reasoned that, on grant of the lease, the layout of the premises was as existing so the rent had to reflect the disadvantages.

I used the same reasoning for another tenant. There the landlord’s surveyor’s conceding nil increase was perhaps why at the next review he was not re-instructed, instead the landlord’s solicitor’s sought a nominal increase which I resisted. And thereafter, five years later, yet another representative of the landlord had a go at trying to defeat my stance.

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