You create a new table and copy the data into it (even convert the column data already). Then you can clear it and change the column and copy it back. Most of the time you could also just drop the table and rename the new table.
By the way, are you using SQL to perform this or using the server manager menu's?
You could try SQL directly and see if this works, like:
ALTER TABLE [dbo].[person]
ALTER COLUMN [lastname] VARCHAR(35) NULL
GO
Won't work though if this is (part of) the primary key.
Good luck!