DAC Beachcroft Real Estate Advisory: Tip of the week - Jack of all trades but restricted to one
Published 12 May 2014
You should always pay special attention to which products and services your tenants are offering their customers. For example, a retailer may be in breach of covenant if it decides to start offering products not envisaged (or indeed invented) when the lease was first entered into and which are therefore not within the permitted use specified in the lease.
A lease may permit a particular use such as the sale of books and 'such other use permitted by the landlord' in which case an application must be made to you for consent to the proposed use if the Tenant wishes to stock electronic devices or other products which cannot properly be described as books.
If the lease does not expressly state that your consent cannot be unreasonably withheld then your right to refuse consent is unrestricted. Where the lease does expressly require landlord's consent not to be unreasonably withheld then you are still entitled to refuse consent on reasonable grounds, for instance if the change of use is likely to reduce the rent attainable on review or on a renewal or reduce the future value of the property. You may also be deemed reasonable in refusing consent to a change of use if this will adversely affect the mix of tenants in your high street parade or shopping centre.
If you grant consent then this should be clearly documented and thought should be given to whether the consent should benefit the tenant's assignees. The new user provision may make the lease more attractive to a potential purchaser in the event the tenant wishes to assign the lease in the future. If you are not prepared to agree to this then you may wish to relax the use restriction by way of a personal concession instead.