Perplexed by property law? Our Professional Support Lawyer Gemma Cook is here to answer your most pressing questions.
I am a tenant of office premises. I no longer need the office space for my own business purposes and given the current economic conditions, I am struggling to find another office user who would like to take an assignment of my current lease or take an underlease from me. Can I re-purpose the property so that it can be used for something else, other than the existing office use?
Whether a tenant can change the use of their premises will very much depend on the terms of the lease which grants the tenant the use of the premises in the first place. The terms of the lease should be the first thing that a tenant should look into if it is thinking of re-purposing its property.
Ordinarily, a landlord would grant a lease for a specific purpose and limit the tenant’s ability to change that use without the express consent of the landlord. This is because a landlord usually wants to keep control of the use of its buildings and/or estates as changes could affect the investment value of the building/estate.
A fairly typical clause in an office lease might look something like this:
“The Tenant must not use the Premises other than for a use within use class E(g)(i) in Part A of Schedule 2 to the Town and Country Planning (Use Classes) Order 1987 and ancillary uses without the consent of the Landlord (not to be unreasonably withheld or delayed)”.
Use classes in leases
The reference to use class E(g)(i) is a way of referring to an ‘office to carry out any operational or administrative functions’, which means, a general office use. An office use for financial or professional services (other than health or medical services) to visiting members of the public is a different category of use falling within use class E(c).
In a lease, the references to the use classes are to classify the permitted use of the premises by the tenant. They do not mean that the tenant can take advantage of permitted development rights under planning legislation that allows changes of use between certain use classes without the need for planning permission or the ability to change a use within the same use class, which does not constitute development and therefore does not require planning permission. Whether a tenant can take advantage of any permitted development rights or the ability to change a use within the same use class will also depend on the drafting of the lease.
Permitted development rights relevant to offices
In certain circumstances, it is possible under planning legislation to convert premises used for use class E purposes to residential dwellings. But even if permitted development rights are permitted at a planning level, the ability of the tenant to take advantage of such permitted development rights is highly likely to be controlled by the terms of the lease.
Landlord consent to changes of use
If changes of use are envisaged by a lease, they are usually limited to similar uses. This, might for example, be swapping between retail uses and usually do not extend to swapping between different use types, for example, office to retail.
In some cases, the lease is silent. If the lease is silent on the use of a premises, the tenant is free to alter the use of the premises without further input from the landlord. However, the tenant should also check whether there is another clause in the lease that could be relevant, such as prohibitions on making planning applications and/or carrying out works to the premises and/or restrictions on sleeping at the premises. Any of these clauses could scupper a change of use from office to residential uses.
In other cases, a lease might allow the tenant to change use with the landlord’s consent (and have no reference to whether the landlord’s consent is to be unreasonably withheld or not). In this case, the landlord’s right to refuse is unfettered, meaning the landlord can be as unreasonable as it wishes. If this is the case and the change of use will require some works that are not structural works, the tenant may be able to take advantage of section 19(3) of the Landlord and Tenant Act 1927 which will mean that the landlord cannot impose a fine or sum of money “in the nature of a fine” for the change of use.
What are reasonable considerations of a landlord for the purposes of landlord’s consent?
In the case where a landlord’s consent to the change of use from office to any other use is not to be unreasonably withheld or delayed, the landlord’s ability to refuse a change of use is fettered, meaning the refusal must be reasonable. There are usually other clauses that also relate to the use, which would still need to be complied with. These could be clauses which prohibit:
- illegal uses;
- a use that could be a nuisance to the landlord or others;
- a breach of load bearing limits;
- a use that overburdens any equipment or services; and/or
- statutory compliance.
So say the tenant wanted to change the use from office use to an educational use, could it? Well, if the consent is not to be unreasonably withheld or delayed, then it might be possible. It would very much depend on what was reasonable in the circumstances for that particular property and that particular use and what other restrictions there are in that particular lease. For example, would the educational use cause the property:
- to be used and occupied more densely than the office use? If it did, the landlord may be reasonable in refusing consent on safety grounds;
- to overstep the capacity of the common services, such as toilet facilities and lifts? If it did, the landlord might be reasonable to refuse consent on the basis it would materially and detrimentally affect other users of the building;
- to need substantial works to be carried out to facilitate the educational use? The landlord may not be required to consent to those additional works, which may ultimately prevent the change in use;
- require additional works to the wider building of which the premises form part? For example, an extra fire escape. The landlord may be able to refuse consent on the basis that the lease most likely does not enable the tenant to require the landlord to build an extra fire escape to serve the premises.
Summary
It is not always cut and dry whether or not a tenant can change the use of a premises from one use to a substantially different use. The changes in the economic climate will affect a tenant’s use of a property. But a landlord might be open to changes in use as it might be looking to diversify uses in a building in any event.
Key points
- Whether a tenant can change the permitted use of a premises as set out in the lease will depend on the drafting in the lease.
- A tenant should seek as wide a user clause as it can negotiate at the point the lease is granted – hopefully envisaging any future changes of use it may wish to make during the term of the lease.
The permitted use clause as set out in a lease is a separate regime to a permitted use for planning purposes. A tenant will need to comply with planning legislation and the terms of the lease.