Commercial Landlords: Understanding Your Responsibilities

From ensuring the safety of the premises to managing the terms of your lease agreements, it is a line of work that requires careful attention to detail. Knowing exactly what your buildings are being used for by tenants is an important part of this. In this guide, we delve into the key responsibilities that you must be aware of as a commercial landlord.

Understanding your Obligations as a Commercial Landlord

As a commercial landlord, your obligations are wide-ranging and encompass various facets of the property you are leasing. These responsibilities are designed to protect both the landlord and the tenant.

Health and Safety Responsibilities

As a commercial landlord, ensuring the safety, security, and overall welfare of your tenants is paramount. You are required by law to ensure that the property, and the building’s communal areas, are safe for occupation.

Key aspects of health and safety responsibilities include:

• Electrical Safety: Landlords are often legally obliged to ensure the property’s electrical system is safe. This includes organising regular safety inspections by a registered electrician.
• Gas Safety: The responsibility for gas safety can either fall with the landlord, the tenant, or both, depending on the lease agreement. As a landlord, you may be required to arrange annual gas safety inspections.

Asbestos Management

Asbestos management is a critical aspect of a landlord’s responsibilities. The responsibility for the management and disclosure of asbestos details lies with either the landlord or the tenant, based on the lease drawn up. Whomever is responsible for the maintenance of the property (or their part of the property) is required by law to have an asbestos survey in place, this is known as an ‘asbestos management survey’.

If asbestos is discovered in the property, there must be compliance with the Health and Safety Executive’s guidance to ensure the safety of all occupants. Failure to manage asbestos risks can result in hefty penalties.

Fire Safety

Landlords and tenants often share responsibilities for fire safety. As a landlord, you are typically responsible for ensuring fire regulations are adhered to in common areas like staircases and lifts and for maintaining fire safety equipment.

The tenant will generally be responsible for the property demised to them by the lease.

Energy Efficiency and Electrical safety

It is advisable for a commercial landlord to have their property surveyed and an Electrical Condition Report (EICR) written by a registered electrician who will also need to inspect the property at least once every five years.

As of April 2023, commercial landlords must ensure that their properties have a minimum Energy Performance Certificate (EPC) rating of E and this standard is likely to be raised in the near future. Unless the property is exempt, it will be illegal to let out a property that does not meet the required standard.

Maintenance and Repairs

The lease agreement will outline the landlord’s responsibilities for maintenance and repairs. Unless the lease relates to a whole building with no other tenants, landlords are generally responsible for structural repairs, including the foundations, flooring, roof, and exterior walls. It’s important to check your lease to confirm whether you can recover these costs (or a fair proportion of these costs) from your tenant(s).

Insurance

Commercial landlords are typically responsible for arranging building insurance. This provides financial security in the event of property damage by an insured risk.

Understanding your Lease

The lease agreement forms the basis of the landlord-tenant relationship. It outlines the terms and conditions of the lease, including the duration of the lease term, the amount of rent to be paid, the permitted use of the property, and the responsibilities of both parties.

As a landlord, it is essential to understand and abide by the terms of the lease. Failure to do so could lead to legal disputes and/or financial losses.

How to Ensure Compliance

As a commercial landlord, ensuring compliance with these responsibilities can seem daunting. However, it is entirely achievable with proper management and a clear understanding of your obligations.

Key steps to ensuring compliance include:

• Regularly reviewing and updating your lease agreements to ensure they reflect current laws and regulations – do not continue to rely on ‘standard-form’ leases that you have used historically without having these reviewed by a solicitor.
• Conducting regular inspections of the property to identify any maintenance or repair issues.
• Engaging professionals for regular safety inspections and maintenance of gas, electrical, and fire safety systems.
• Keeping open lines of communication with your tenants to address any concerns or issues promptly.

The Code for leasing business premises in England and Wales

The Code for leasing business premises in England and Wales sets out the responsibilities of commercial landlords and tenants. While there is no legal obligation for landlords to follow the Code, it is authorised by regulatory bodies including, the British Council for Offices, the British Retail Consortium and the Confederation of British Industry. The Code covers:

• Alterations and changes of use;
• Assignment and subletting;
• Insurance;
• Lease negotiations;
• Ongoing management and service charges;
• Rent guarantees and deposits;
• Rent reviews;
• Service charges;
• Term lengths, renewal rights and break clauses.

The Code is useful for commercial landlords as it sets out best practice.