Commercial property premium

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    Commercial property premium

    Anyone familiar with the laws on the premium required for change of use to convert a basement of a retail shop into a residiential flat . Are there limits to what the landlord can ask?.. The landlord is a charity housing organization

    #2
    Ir depends what the user and alteration clauses say. Please set them out in full,

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      #3
      Provided it is not unlawful for the landlord to charge for a consent there is no limit on the amount of premium that can be asked. Whether it would be unlawful depends, (I agree with Lawcruncher), on the wording of the user and alterations clauses in the lease.

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        #4
        Thanks your replies guys. The only info I can see in the lease document is under the heading "alterations" - 'not to make any other alterations or additions to the property without the landlord's consent (which shall not be unreasonably withheld or delayed.)'
        There doesn't seem to be any mention of the requirement of a premium within the lease. They have verbally agreed that the level of premium due should be such that the project would actually be worthwhile undertaking from my perspective. I'm currently in negotiations with the landord (a charity) - In order to strengthen my position do you think that precedents from similar projects would have any influence as regards the premium requested? Any help and tips much appreciated..

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          #5
          Most commercial leases have an absolute bar on any part of the accommodation being used for residential purposes and there is no law, as to what the landlord can charge to vary a lease it is purely a matter of negotiation.

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            #6
            One wouldn't expect any mention of a premium in the lease. Regarding the change of use and alterations, landlord's consent not to be unreasonably withheld, etc, the overriding legislation is Landlord and Tenant Act 1927 at section 19(2) and 19(3)

            (19(2) "In all leases whether made before or after the commencement of this Act containing a covenant condition or agreement against the making of improvements without a licence or consent, such covenant condition or agreement shall be deemed, notwithstanding any express provision to the contrary, to be subject to a proviso that such licence or consent is not to be unreasonably withheld; but this proviso does not preclude the right to require as a condition of such licence or consent the payment of a reasonable sum in respect of any damage to or diminution in the value of the premises or any neighbouring premises belonging to the landlord, and of any legal or other expenses properly incurred in connection with such licence or consent nor, in the case of an improvement which does not add to the letting value of the holding, does it preclude the right to require as a condition of such licence or consent, where such a requirement would be reasonable, an undertaking on the part of the tenant toreinstate the premises in the condition in which they were before the improvement was executed."

            19(3) " In all leases whether made before or after the commencement of this Act containing a covenant condition or agreement against the alteration of the user of the demised premises, without licence or consent, such covenant condition or agreement shall, ifthe alteration does not involve any structural alteration of the premises, be deemed, notwithstanding any express provision to the contrary, to be subject to a proviso that no fine or sum of money in the nature of a fine, whether by way of increase of rent or otherwise, shall be payable for or in respect of such licence or consent; but this proviso does not preclude the right of the landlord to require payment of a reasonable sum in respect of any damage to or diminution in the value of the premises or any neighbouring premises belonging to him and of any legal or other expenses incurred in connection with such licence or consent.

            Where a dispute as to the reasonableness of any such sum has been determined by a court of competent jurisdiction, the landlord shall be bound to grant the licence or consent on payment of the sum so determined to be reasonable"



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              #7
              Many thanks rentreviewspecialist for that info. I was wondering if the new Permitted Development Rights’ (PDR) system which is designed for conversions from retail to residential ever has to look at premiums and what is considered fair in terms of an amount or a percentage..?

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                #8
                Basically, if the landlord cannot unreasonably withhold consent no premium is fair because when the lease ends the landlord gets the value of the improvement. If he also gets paid a premium he gets a double benefit.

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                  #9
                  Thanks again guys. Seeing as there is no limit to what they can ask for a commercial to retail conversion, I will need a solicitor who can argue my side to get the premium to a reasonable level..If anyone knows anyone??

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