REALWorld Law

Commercial leases

Alterations

Is the lessee permitted to alter or improve the real estate and, if so, what conditions can be imposed on such works?

Angola

Angola

The lessee may only carry out the works when the lease agreement includes authorization for this purpose or subject to the lessor’s prior written consent. In the event that improvement works are carried out the lessee is entitled to compensation. Typically, the lease agreement sets forth a waiver to such compensation.

If the lessor is compelled to execute works by the relevant administrative authority and does not carry out such works or in case the works are urgent, the lessee may carry out said works provided that (i) a budget for the works is provided by the relevant administrative authority and (ii) the lessor is duly informed of the cost of such works.

In this scenario, the lessee is entitled to the payment of the expenses and in the event of delay, interest applies.

Australia

Australia

Unless the tenant is allowed to carry out specified work in the premises as set out in the lease, any alteration to the premises, major or minor constitutes a breach of the covenant for repair. Most leases limit a tenant's right to alter or improve leased premises. Structural alterations are frequently prohibited, particularly where the tenant only leases part of the building. Non-structural alterations normally require the landlord's consent.

Belgium

Belgium

General leases (offices, warehouses, industrial buildings)

Parties are free to agree conditions for any alterations and improvements in the lease contract. Standard lease contracts will require the landlord's prior written consent for changes.

Commercial leases (retail and workshops)

The Commercial Lease Act states that a tenant is always permitted to permanently change the structure of the rented premises, but that the alterations:

  • Must be useful to the tenant’s business
  • Can only affect the business premises
  • May not cost more than three years’ rent

The parties cannot agree for different provisions to apply.

A tenant who wishes to carry out renovation must notify the landlord by registered mail or by a notice served by a bailiff. This request must also be accompanied by the architect’s plans and the contractor’s specifications or cost estimate.

The landlord has 30 days to give formal notice of opposition to any scheduled renovation works or it will be assumed that he has consented to the works on the terms proposed. Disputes must be settled by a judge.

The landlord has the right of access to the site and may require the tenant to take out additional insurance.

The parties may agree that the specific provision of the Commercial Leases Act relating to renovation/improvements will apply on termination. This provides that, where renovation works have been carried out with the explicit or tacit consent of the landlord, or following a judicial decision to that effect, the landlord cannot demand that the premises are returned to their original condition. Where the landlord demands that alterations are left in place he must compensate the tenant. The landlord can choose either to compensate the tenant for the value of the materials and labour, or to pay an amount equal to any increase in value of the rented premises. Where works have been carried out without the landlord’s consent, he has a right to demand that the rented premises are restored to their original state, or may require the alterations to be left in place without paying compensation. In the case of alterations that do not permanently alter the use of the rented premises, the Commercial Lease Act does not provide any specific arrangements, so the general provisions of the Civil Code apply.

Commercial leases (pop-up retail and workshops)

In pop-up leases both in Flanders, the Walloon Region and the Brussels Capital Region, unless otherwise agreed, the tenant is permitted to perform transformations which:

  • Are useful to the tenant’s business
  • Do not affect the security, the healthiness, and the esthetical value of the rented premises
  • Do not cost more than one years’ rent.

However, the parties are allowed to agree in writing on different provisions to apply.

A tenant who wishes to carry out transformations must notify the landlord in writing before the start of the transformations. For pop-up leases in Brussels and the Walloon region, the landlord has 10 days to give formal notice of opposition. For pop-up leases in Flanders, no statutory objection right is included in the Flemish Decree (although parties are expressly allowed to contractually foresee this as they may deviate from the Decree on this point).

The landlord has the right of access to the site and may require the tenant to take out additional insurance.

Where works have been carried out without the landlord’s consent or without complying with said consent, he has a right to demand that the transformations are stopped.

At the departure of the tenant, when transformations are performed at the costs of the tenant, the landlord can request their suppression, unless otherwise agreed. If the landlord keeps said transformations, he is not required to pay any compensation.

Bosnia-Herzegovina

Bosnia-Herzegovina

Most leases limit the tenant's right to alter or improve premises. Structural alterations are frequently prohibited. Non-structural alterations normally require the landlord's prior consent.

On termination of the lease the tenant is obliged to return the premises in a condition agreed with the landlord, or in the same condition as they were originally.

The landlord may require any alterations to be removed upon termination of the lease. If the property has been damaged or has had its original function or designation changed as a result of alterations then the tenant will be required to pay compensation to the landlord.

Canada

Canada

The tenant’s right to alter the leased property is defined in the lease terms. Structural alterations are frequently prohibited, particularly where the tenant only leases part of the building. Non-structural alterations normally require the landlord's consent. Many leases deem improvements to become the property of the landlord on installation, but reserve the right for the landlord to require those improvements to be removed by the tenant at its cost on termination of the lease.

China

China

The lessee is allowed to alter and improve the premises with the lessor's consent but should not alter load-bearing structures or indoor facilities without the required authorizations.

Where the lessee makes alterations without the lessor's consent, he pays the cost in full and is also obliged to restore the premises to their original condition or compensate for any damage when the lease expires.

Croatia

Croatia

Most leases limit a tenant's right to alter or improve the premises. Structural alterations are frequently prohibited, particularly where the tenant only leases part of the building. Non-structural alterations usually require the landlord's consent, which may not be unreasonably withheld. Upon termination of the lease the landlord may require any improvements to be removed in order to avoid paying the tenant compensation.

Czech Republic

Czech Republic

Not unless the parties have agreed otherwise. Any alterations to the premises require the prior consent of the lessor. The lessee may require reimbursement of costs connected with such works only if the lessor has agreed to this. If the lessor approves the alterations but has not agreed to reimburse the costs, the lessee may, after the termination of the lease, claim compensation equal to the increase in the value of the asset.

Where alterations are made by the lessee, one of the following arrangements will normally apply in practice:

  • The lessee is entitled to deduct the cost of the alteration/improvement from the rent (either in part or in full)
  • The lessee pays the cost in full, but is not obliged to restore the premises to their original condition when the lease expires
  • The lessee pays the cost in full and is also obliged to restore the premises to their original condition when the lease expires.
Denmark

Denmark

Most contracts limit the lessee's rights to alter or improve the premises. Significant alterations normally require the lessor's prior consent in contrary to certain customary installations, alterations and displaying of signs.

On termination, the lessor may require the alterations to be removed to avoid having to pay the lessee compensation.

In general, the lessee is obliged to return the premises in same condition as they were in when they were taken over.

France

France

Any works must have the prior consent of the landlord if they impact on the structure of the property (walls, floors and roof) or if they alter the premises' character or legally permitted use.

It is market practice for leases to provide that, on the expiry of the lease, any improvements automatically become the property of the landlord without indemnity, unless the landlord requests their removal and/or the reinstatement of the premises to their original state.

Germany

Germany

Standard leases require the landlord's prior written consent for alterations. It is often a condition of consent that the tenant restores the property to its original condition at the end of the term of the lease. Alternatively, the parties may agree that the tenant is entitled to leave the alterations in place. Sometimes, the parties agree that the landlord will compensate the tenant for the cost, but such provisions are subject to negotiation.

Hong Kong, SAR

Hong Kong, SAR

Most leases limit a lessee's right to alter or improve a property. Structural alterations which usually involve an alteration of the form and framework of the building are frequently prohibited, particularly where the lessee only leases part of the building. Non-structural alterations normally require the lessor's consent.

Hungary

Hungary

Structural alterations normally require the consent of the landlord. If the tenant makes structural changes to the property, the parties must agree on the costs. Without such an agreement, the tenant is not entitled to claim compensation for any improvements. If improvements cannot be removed without causing damage to the leased premises, the tenant may claim compensation from the landlord on the basis that the landlord would otherwise be unjustly enriched. The tenant may remove other improvements.

Ireland

Ireland

A standard lease will include a clause prohibiting the tenant from altering the premises in any way without the landlord's prior written consent. The landlord will usually want to see the plans and specifications before agreeing to any alterations. It may also be a condition of the landlord's consent that the premises be fully reinstated at the end of the term of the lease. The parties may negotiate concerning the tenant's right to carry out non-structural alterations without prior written consent.

Italy

Italy

Most leases limit the tenant’s right to alter or improve the premises. Structural alterations are usually prohibited, particularly where the tenant only leases part of the building. Non-structural alterations usually require the landlord’s consent. The parties can agree in the lease contract that the landlord cannot unreasonably delay or withhold such consent.

Pursuant to the Italian Civil Code, at certain conditions, the lessee has the right to be paid an indemnity for the additions and improvements made during the lease; in the lease market practice, a provision excluding such right is usually included into the lease contracts.

Usually, in the lease contracts, the landlord reserves the right to require the lessee, at the end of the lease, to remove, in whole or in part, any alterations, additions and improvements made during the lease, at its own cost.

Japan

Japan

The lessee typically agrees not to alter or improve the premises without the lessor's consent except in the case of minor alterations or improvements, such as changing the wallpaper or partitioning the premises.  In addition, many lessors require the lessee to use the lessor's contractor for alterations or improvements even where the lessor consents to such alterations or improvements.  At the end of the lease term, the lessee is obligated to return the premises to the lessor in their original condition at its own expense upon expiration of the lease term.

Netherlands

Netherlands

Most leases determine that alterations require the lessor's consent, unless the alterations can be removed at negligible cost. Upon termination, the lessor has the right to require any unauthorized improvements to be removed. From the perspective of the lessor, it is advisable to stipulate that improvements have to be removed by the end of the lease unless otherwise agreed, and to exclude the possibility of the lessee claiming compensation for the improvements. It is becoming more common practice to permit in advance alterations that do not affect the structure of the leased property.

Nigeria

Nigeria

In contracts for commercial leases, it is usual to impose restriction that the lessee shall not alter or improve the property without the written consent of the lessor and subject to the lessor’s approval of the plans of the proposed improvements. In the absence of the lessor’s express consent a lessee in breach of the condition will be liable for damages.

All buildings are subject to government’s physical planning and building control agency’s approval before construction and the law requires that for structural alteration of buildings, the approval of the relevant agency is required and at a fee. It is therefore usual for the lease agreement to contain an obligation on the part of the lessee to obtain all necessary approval of the town planning authorities before commencement of alterations.

The lessor may impose an obligation that at the expiry of the lease, the lessee is to reinstate the property to its state at commencement of the lease. The lessor may choose not to enforce this covenant if it wishes to maintain the improvements.

Except for aesthetical changes to the property desired by the lessee, the obligation for structural repairs where there are damages to the property is the lessor’s responsibility. There is no obligation on the lessor to reimburse the lessee for the costs of the improvements of the property without its express consent.

Norway

Norway

Tenants are not usually allowed to alter and/or improve premises without the landlord's written consent, and structural alterations are not normally allowed. The parties must agree on whether or not the premises need to be restored to their original condition at the end of the lease period, and how any costs and benefits related to the alterations and improvements will be allocated.

On termination, the landlord may require the tenant to remove any improvements in order to avoid paying compensation.

Poland

Poland

Yes, however in the case of improvements made by the tenant, the landlord may either leave the improvements in place upon termination of the lease and pay the tenant appropriate compensation or alternatively the landlord may require the property to be restored to its former state. In most lease agreements, alterations and improvements require the landlord's prior consent. The agreement may state that such consent is not to be unreasonably withheld or delayed.

Portugal

Portugal

Unless a provision stipulating otherwise is included in the contract by the parties, it is up to the landlord to carry out ordinary and extraordinary repair works.

The tenant may only carry out the works when the leasing contract allows it, or when there is a written consent from the landlord unless the works are urgent. In this last case, the tenant may carry out the works and has the right to be paid for the expenses and may offset the expenses incurred in doing the works with the rent they owe under the lease.

The tenant may (and is under an obligation to) carry out small repairs in the property so that it remains adequate for its purpose.

Should the tenant carry out improvement works in the property they shall be entitled to be compensated for the works ('required improvement works') or to survey the works required ('useful improvement works') provided they do not prejudice the property. However, it is normally established in the contract that the tenant is not entitled to this compensation or to survey the improvement works.

The tenant is not entitled to receive any compensation due to:

  • Small works to assure the comfort and the quality of the property
  • Works to repair the deterioration caused by the tenant due to the careless or abnormal use of the property
  • Works which were not authorized by the landlord and which considerably modify the external structure or the internal division of the property
Romania

Romania

The tenant can improve or alter the real estate as long as its designated use is not affected. If such improvements are made without the consent or the landlord, the landlord can opt either to keep the improvements, without any compensation being due to the tenant, or to ask the tenant to remove them and be responsible for any damage caused.

Slovak Republic

Slovak Republic

The landlord's consent is required before any changes are made to the property, otherwise the tenant will be required to restore the property to its original condition at the end of the lease. If the tenant has made alterations without the landlord's consent which may result in significant damage, the landlord is entitled to terminate the lease.

The tenant may be able to claim a reimbursement of any costs incurred in relation to alterations if the alterations were approved by the landlord and the landlord agreed to cover the costs.

Alternatively, upon the termination of the lease, the tenant may be able to claim from the landlord the amount by which the property has increased in value as a result of the alterations made, if these were approved by the landlord, but the landlord did not cover their cost.

In some specified cases, the alteration and improvement of real estate can be restricted by special legislation (such as in the case of culturally protected real estate).

Spain

Spain

Under the Spanish Civil Code, parties are free to agree the conditions of the lease as they wish provided they don’t contravene any law or moral code, or pose a threat to public order.

Standard leases require the landlord's prior written consent to any alterations. If the landlord gives consent the tenant is often obliged to restore the premises to their original condition at the end of the lease. Alternatively, the parties can agree for any alterations to be left in place, in which case compensation may payable by the landlord. However, this depends on what the parties have negotiated.

Sweden

Sweden

Leases generally restrict a tenant's right to alter or improve the premises without the landlord's consent. Normally, alterations to the interior of the premises are permitted. However, on termination, tenants are frequently required to restore the premises to their original condition.

Thailand

Thailand

This matter is solely a contractual arrangement between the parties.

United Arab Emirates - Abu Dhabi

United Arab Emirates - Abu Dhabi

Within Abu Dhabi and outside the Abu Dhabi Global Market free zone

Most leases limit a lessee’s right to alter or improve property.

Under the legislation, changes are not permitted without the lessor’s consent (unless such changes will not damage the property). If the lessee breaches this stipulation, the lessor can compel the lessee to restore the property and pay compensation if necessary.

If the lessee cultivates or makes improvements to the property, the produce or improvements must be abandoned at the end of the term, unless otherwise agreed in writing.

Within the Abu Dhabi Global Market free zone

Within the Abu Dhabi Global Market free zone the parties are free to contract as they wish.

United Arab Emirates - Dubai

United Arab Emirates - Dubai

The law requires the tenant to obtain the consent of the landlord to all proposed works. The terms of a lease may also set out what kinds of works the tenant is permitted to carry out, when the landlord's consent should be sought for such works and whether any types of works (eg structural) are absolutely prohibited.

There is no requirement in the law for a landlord to not unreasonably withhold or delay its consent, but as tenants are increasingly gaining bargaining power, it is becoming more common to see such wording in a lease.

Certain works require the consent of government authorities such as Dubai Municipality and Civil Defence. In order to obtain such consents, these government authorities will require evidence of the landlord's consent to such works. In these circumstances, the law requires the landlord to give its consent to such authorities where the tenant is proposing to carry out non-structural works which require such third party approval.

The law requires the tenant to return the property to the landlord at the end of a lease in the same condition in which it was received by the tenant at the outset of the lease. In other words, any works carried out by the tenant need to be reinstated. 

UK - England and Wales UK - England and Wales

UK - England and Wales

Most leases limit a tenant's right to alter or improve a property. Structural alterations are frequently prohibited, particularly where the tenant only leases part of the building. Non-structural alterations normally require the landlord's consent, although in the case of improvements statute requires the landlord to give consent unless it can be reasonably withheld. Under statute, tenants are entitled to receive compensation for any alterations made if they are considered improvements to the property, although in order to avoid this leases almost always require improvements to be removed on termination of the lease.

UK - Scotland

UK - Scotland

The tenant's right to alter/improve the premises is normally restricted by the lease.

An absolute prohibition on structural alterations is now standard, and non-structural alterations require the landlord's consent, although this must not be unreasonably withheld or delayed.

The tenant is normally required to remove any alterations, if the landlord requires this, on the expiry of the lease.

Ukraine

Ukraine

A lessee is entitled to improve the leased real estate subject to the consent of the lessor. Specific conditions (eg scope or terms) for the improvements are subject to agreement between the lessee and the lessor. Ukrainian law categorizes improvements as separable or inseparable. Separable improvements may be removed by the lessee at the end of the term of the lease agreement provided that such removal does not cause damage to the leased real estate. Improvements which cannot be removed without causing damage to the leased real estate are described as 'inseparable'. The lessor must pay the lessee compensation for any improvements that were made with the lessor's consent, unless otherwise agreed by the parties in the lease agreement or in a supplemental agreement.

United States

United States

The provisions of the lease will govern to what extent, if any, the tenant is permitted to perform alterations at the premises and under what conditions. Additionally, local and other laws will often regulate the conduct of alteration work performed at the premises, including requirements for ensuring the safety of construction work and the adequacy of fire protection systems and affording access to disabled persons. Depending on the type of alteration and the local jurisdiction rules, the tenant may need to comply with governmental requirements prior to commencing the work, such as obtaining a building permit from a local building or planning department. Many commercial leases will also include a work letter setting forth improvements that are to be performed as part of the tenant’s initial occupancy of the leased premises. Depending on the deal, the landlord or the tenant may be responsible for performing such work, and the landlord may or may not provide an allowance for such work. If an allowance for such work is not applicable, then the landlord may be responsible for performing the work on a so-called “turnkey” basis (i.e., at the landlord’s cost), subject to exceptions intended to ensure that actual costs do not exceed the landlord’s budget for such costs. In any event, how much of an allowance or “turnkey” work is contemplated as part of a lease, if at all, will often be taken into account by the parties in deciding what the base rent should be, any applicable base rent abatement and any other economic terms.

Zimbabwe

Zimbabwe

The parties have freedom to contract in this regard, however, typically the provisions of the lease agreement will state that the lessee is not permitted to alter or improve the property without prior written consent from the landlord. Should any alterations or improvements be made, it shall be at the expense of the lessee, and that such improvements or alterations will be removed without damaging the property upon termination of the lease. The property must be restored to the condition that it was in at the commencement of the lease. Any alterations or improvements that remain will then become the property of the landlord and the lessee will not be able to claim compensation in that regard.

Exterior and structural improvements or repairs are normally the obligation of the landlord.