Commercial Lease – Obligations And Responsibilities
commercial-lease-obligations

Commercial Lease – Obligations And Responsibilities

As the landlord or tenant of a commercial property, you will have many responsibilities to ensure that your property is a safe place for people to work. These will mainly be to do with maintenance and repairs, but the specific responsibilities of the landlord will vary depending on the terms of the lease.  In addition, some of the duties can be passed on to the tenants in the terms and conditions, which will make the lease less onerous to the landlord.

It is crucial that everyone involved in the commercial lease understands their obligations and makes sure that they are carried out properly.

What does your commercial lease say?

Whether you’re the landlord or the tenant, your starting point should be to read the lease to see what the obligations are and who is responsible.  If you’re not sure, ask your solicitor to check it over for you, and give you a list of all the things you need to know but here are the likely highlights.

Gas safety

Under ‘The Gas Safety (Installation and Use) Regulations 1998’, the person responsible for gas safety must ensure and gas-operated fitting is ‘maintained in a safe condition’. As well as making sure each gas appliance and flue is checked for safety by an official Gas Safe registered engineer within 12 months of being installed and then checked again at regular 12-month intervals. Records must be kept of these annual gas safety inspections for a minimum of two years.

Tenants should check the terms of their lease in order to fully understand if they have any obligations during the life of the lease in regard to gas safety.

If a property is let solely for commercial purposes these regulations do not apply.  However it may still be good practice and even in a commercial lease, it is important to check whether a building has joint use for both residential and commercial purposes, as well as if there are any common parts or shared spaces that have a gas supply or gas appliances.

Failing to comply with the Gas Safety Regulations can lead to large fines, or in some severe cases, even imprisonment.

Fire safety

The Regulatory Reform (Fire Safety) Order 2005 (“the Order”) also imposes various duties on the appointed “responsible person”, who is the person responsible for fire safety in respect of premises to which the Order applies.  Depending on the size of the building and how many businesses are run from it, it could cover more than one person. The “responsible person” (or persons!) will be the employer in relation to a workplace and either the person who has control of the premises or the owner of the premises where it is not a workplace, for example, an unmanned storage warehouse.

Duties under the Order include:

  • taking ‘general fire precautions’ to ensure the safety of certain people in the event of a fire, such as putting in place measures to minimise the risk of a fire and/or the spread of it, having in place suitable fire escape routes, smoke alarms and providing fire extinguishers;
  • carrying out a risk assessment and reviewing this regularly to pick up on any potential fire hazards, changes or improvements which could be made; and
  • ensuring that any fire safety equipment and emergency routes and exits are properly maintained and kept in good working order and that the premises are kept in a good state of repair.

A “responsible person” who is found guilty not complying with the Order can be fined and even imprisoned in serious cases if proceedings are brought in the Crown Court.

Electrical safety

Landlords are responsible for the electrical safety of the property in some cases.  However, even if you are not responsible, you are generally in charge of conducting regular risk assessments of your property, which may include electrical products as a potential fire hazard. While there is no legal requirement for the landlord to provide a certificate to the tenant, the Electrical Safety Council recommends that testing is carried out every five years or on a change of tenancy.

As a landlord, you have a duty of care to ensure that all reasonable steps and precautions have been made to prevent personal injury to tenants, or damage to their property. Substantial claims for compensation can result from failure to do so.

Managing asbestos

There is an obligation on the “duty holder” to manage asbestos under the Control of Asbestos Regulations 2012. This includes a collection of smaller duties, such as regular and sufficient risk assessments are carried out to determine whether asbestos is present on the premises; assessing the risk of anyone being exposed to fibres from the materials you have identified; and taking appropriate action to manage any risks which must be identified in a written plan.

The duty holder will be the owner of the non-domestic premises or the person or organisation with a clear responsibility for the maintenance or repair of non-domestic premises. In reality, the responsibility nearly always falls to the tenant as in most cases the landlord would be reluctant to agree to managing asbestos when they are not in occupation or control of the property.

Any buildings constructed after 2000 should not contain asbestos, as it’s use was banned in 1999.  However, landlords should presume that asbestos is present in any property built before this time unless they have an expert’s report that says otherwise. Just because asbestos is found within a property, this does not mean that it necessarily needs to be removed, as there may be little risk of anyone being exposed. However, any work that you carry out to part of the building containing asbestos would need to be done by a licenced contractor as the asbestos may be disturbed, a list of licenced contractors can be found on the Health and Safety Executive’s website.

Fixtures and fittings

Any fixtures and fittings that have been installed by the landlord need to be securely and safely constructed and maintained by the landlord. The lease should set out the landlord’s contact details so that if the tenant discovers any issues notice of these issues can be served.

Maintenance Within a Commercial Lease

The responsibilities of both parties should be clearly set out in the lease. Usually, the tenant will have to keep the premises in good or substantial repair and condition. It may surprise some tenants that ‘keeping in good repair’ will mean that if the premises were not in good condition at the start of the lease, they will have to put them into good repair unless the lease says you have permission to leave it in the condition that it is in. Leases of this type are commonly known as a full repairing lease (FRI’s).  If you have an FRI, a tenant may be advised to have a survey carried out to assess the condition of the property before entering into a lease. This way they could negotiate for the landlord to carry out repairs before the term begins, or to reduce the premium or rent for the first payment to allow for the costs to the tenant of these repairs. In negotiations, you could also try to limit the repairing obligation to a photographic schedule of condition which is attached to the lease.

If the tenant is only leasing part of a larger building, such as an office space, the landlord may retain the responsibility for maintaining the building itself.  The tenant may still have to contribute to the cost, through the service charges.  If you are considering leasing a property, you could ask for the last three years of accounts and information about any planned works so you can budget accordingly.

If you are a landlord, the tenant may ask you if they can carry out work to the property once they are in occupation. If you agree to this, it is recommended that you require the tenant to provide plans and specifications so that you can grant them a license to carry out those specific works, and nothing else which may be less desirable to you. You can also require that the tenant removes any alterations before handing back the property at the end of the lease, which may be a good idea if you think it may reduce the value of your property.

The lease should also be clear on whether alterations will be considered when the rent is reviewed.

Health and safety

The tenant must carry out a health and safety risk assessment in the workplace and take action to remove any hazards when renting a property for its business. They will also be responsible for providing a reasonable temperature, enough space, ventilation, lighting, toilets and washing facilities, drinking water and safe equipment. The tenant could be prosecuted under the Health and Safety at Work etc. Act 1974 if they fail to comply with health and safety laws.

The landlord will be held responsible for health and safety in communal areas which are defined in the lease. However, as a tenant, you must take reasonable steps to make your landlord comply with these responsibilities to ensure the safety of your staff and customers.

A voluntary practice code for landlords, The Code for Leasing Business Premises, states that exactly who should be obliged to maintain the premises will depend on the length of the lease and the condition of the premises. However, in any case the responsibilities of both parties should be set out clearly in the lease and both parties should be sure that they fully understand their respective responsibilities.

It is standard practice for the tenant to be obliged to leave the premises in the same condition as when they signed the lease. Any issues that are a health and safety hazard should be flagged with the landlord.

Minimum Energy Efficiency Standards (MEES)

Since 1 April 2018, eligible rented properties have to have a minimum energy performance rating of E on an Energy Performance Certificate (EPC). Implementation of the regulations has been staggered, so that starting on 1 April 2018 it only applied to new leases of eligible residential or commercial property. From 1 April 2020, it will be unlawful to continue to let eligible residential property, and from 1 April 2023 it will be unlawful to continue to let eligible commercial property which does not meet the minimum energy efficiency standards.

Failure to comply with these new regulations can result in a fine of up to £5,000.

Some properties are exempt from this rule, such as buildings that have a temporary use or places of worship. Tenancies with a term of 99 years or more, 6 months or less, or properties that are generally exempt from the EPC requirements, fall outside of the scope of the regulations. General exemptions can be applied for if certain criteria are met. There is some debate as to whether the regulations apply to Listed Buildings. Landlords currently have some leeway in terms of properties that cannot be improved to an E rating as the work required would fundamentally change the character or appearance of the property, in these cases, they may be granted an exemption.

Commercial property insurance

In most cases, the landlord will arrange and pay for buildings insurance to provide financial security if the property is damaged. The insurance should represent good value for money, and the landlord should provide details of the full policy if the tenant requests this.

There are many types of insurance policies available, so it is a good idea to speak to a financial expert or solicitor who can make sure that the policy is sufficient.

If you are a landlord or tenant entering into a commercial lease, always get expert help to make sure you fully understand and can meet your responsibilities under the lease.

Disclaimer – our articles are designed to give you guidance and information.  There is no substitute for proper direct advice, particularly as everyone’s circumstances are different.  If anything in this article may affect you, please contact us for advice that is specific to your circumstances.

 

What our clients say

Great value for money. Everything went smoothly and I was very pleased with the service provided
Rachel Whitfield
Rachel Whitfield
20:59 12 Oct 18
Excellent! Very responsive, and really helped to push the purchase. There were unexpected delays during the process, but Anthony really helped to reassure me that he was doing everything he could to progress the sale. Ultimately, it all worked out in the end, and I would highly recommend! I would also recommend for auction purposes.
Sean Stevens
Sean Stevens
09:14 21 May 18
Very happy customer. Understanding of our needs and recommended a really fantastic solicitor.
Jack Hearne
Jack Hearne
17:49 12 Oct 18
I have just completed the purchase of my flat with them. They were recommend by the estates agents Phillip Arnold and they were fantastic. My case was handled by Milena who was really helpful and always available on the phone. The online system is also really easy to use. If I buy or sell a property I will definitely be using them again.
Sharon Kelly
Sharon Kelly
18:27 20 Dec 17
I used this service following a recommendation. The online case tracker worked really well. I would recommend this service as it's vital in the coordination between Estate Agencies and between Solicitors. The service proved invaluable in helping progress the conveyancing work efficiently and effectively. Completed the transaction just before Christmas having instructed the Solicitors on the 4th.
Shelly Harrill
Shelly Harrill
16:30 19 Dec 17
Excellent Service. Final Price same as quoted.
A Google User
A Google User
14:26 19 Dec 18
Have used them twice. Both times completion happened in less than 4 weeks, even over Xmas! Totally amazing. They take the stress out of the whole process.
Daniel West
Daniel West
13:04 21 Dec 18
Excellent Service. Final Price same as quoted
Parsa Khamooshi
Parsa Khamooshi
15:54 21 Dec 18
Being a first time buyer they guided me smoothly through the whole process of moving into my first home. Very professional and economical.
Uday Seth
Uday Seth
12:31 24 Dec 18
Express Conveyancing have been excellent in the handling of my recent house sale and purchase. Would highly recommend
James Ellis
James Ellis
11:43 30 Apr 19
Express Conveyancing have been excellent in the handling of my recent house sale and purchase. Would highly recommend
Michelle Preston
Michelle Preston
12:20 30 Apr 19
ThanksThanks for handling my sale and purchase. No complaints from me. Rebecca was regularly on hand to help with my queries and deal with issues.
Claire Miles
Claire Miles
17:48 07 May 19
I bought my first home in South London with Express Conveyancing . Great professional service, I was regularly updated and looked after. Top marks, 100% recommendation from me!
Dale Griffiths
Dale Griffiths
15:58 02 May 19
Good service and happy with the conveyancer
Chris Jenkins
Chris Jenkins
22:01 17 May 19
Great service from start to finish. Was great being able to see progress online! Very quick and efficient! All staff were helpful. Highly recommend
Reece Moseley
Reece Moseley
06:20 30 May 19
I would highly recommend them. They deal with any queries promptly and efficiently. Would definitely use them again.
Sahar Dalini
Sahar Dalini
09:13 10 Jun 19
Fair prices good efficient service
Sue Batchelor
Sue Batchelor
18:46 01 Jun 19
I would highly recommend them. They deal with any queries promptly and efficiently. Would definitely use them again.
Sahar Dalini
Sahar Dalini
09:14 10 Jun 19
This company does not provide conveyancing services directly, they are an introductory company, paid by solicitors to get clients for them. Once you engage with a conveyancing solicitor suggested by them, they don't interfere, and how quick or slow the process is depends on that solicitor that paid them to recruit you. In our case the solicitor was pleasant and corteous, but a bit relaxed, and the whole process took about 9 weeks - about average, but there was nothing "express" about it.About the app to track progress, it is updated by the conveyancing solicitor, so its its usefulness depends on how much he engages with it. In our case, not so much.
Pedro Silva
Pedro Silva
18:27 02 Oct 19
Absolutely outstanding service provided by Rebecca. She really got things moving when they came to a halt. I was moved within 9 weeks. If it wasn't for Rebecca, the move wouldnt have happened that quick. Definitely use EC again in the future.
Sara Kawsar
Sara Kawsar
11:35 03 Oct 19
we purchased a new build flat. The staff at Express were very helpful in finding us our solicitors who was great.
Carl Devenport
Carl Devenport
14:48 26 Sep 19
great service. Completed quickly as promised
Mark Slavinski
Mark Slavinski
16:52 24 Sep 19
Was looking for a modern solicitor with an online website status page so you can live track your progress. The service was fast and they assigned us with a solicitor firm, which was very fast, efficient and pleasant to deal with. HIGHLY RECOMMENDED
Cedric Tomas
Cedric Tomas
21:29 13 Mar 20

Our News

× Whatsapp Us