What are a commercial landlords responsibilities?

A suited man's outstretched hand holding a set of keys

A commercial landlord’s responsibilities are not the same as his or her residential counterpart’s. Where the two differ is mainly in the absence of ‘implied covenants’ – obligations imposed on the landlord by statute, irrespective of what is included in the lease.

Commercial Landlords may contract out of The Landlord and Tenant Act (1985) responsibilities

The Landlord and Tenant Act 1985 placed upon landlords of residential properties the onus to carry out certain repairs (see buy-to-let property repairs for more information) 1, as well as other statutory obligations. The purpose of such legislation is to clearly reinforce various obligations that exist in common law. Commercial landlords, however, may contract out of these obligations, and therefore your responsibilities are largely dependent upon the lease you and your tenant have signed 2.

What is a landlord responsible for under a commercial lease?

The majority of modern commercial leases are therefore FRI (full repairing and insuring) leases, which impose full repairing and insurance obligations upon the tenant. This includes:

  • Carrying out health and safety risk assessments and removing any hazards
  • Fire and electrical safety
  • Gas safety, including any necessary checks and services by a registered engineer
  • Dealing with asbestos
  • Ensuring the workplace has adequate lighting, space, ventilation, sanitary facilities and drinking water, that all equipment is safe to use, and that the premises are kept at a reasonable temperature (13°C for manual work or 16°C for non-manual work)

(Source: https://www.gov.uk/renting-business-property-tenant-responsibilities)

With regards to insurance, it is common for FRI leases to allow the landlord to insure the property and reclaim the cost of the premiums from the tenant. This gives you free reign to choose your insurer and policy and guarantee that your property is insured at all times.

Communal areas in commercial property

If you own a multi-let building with communal areas, you will be responsible for repairs, insurance and health and safety management of these areas. However, you can claim a service charge from your tenants to cover this, and most FRI leases include such a charge as standard. Note that the service charge to recoup the cost of communal repairs and the charge to recoup the cost of insurance are usually separate 3.

Consent for alterations and improvements

From minor alterations to substantial renovations, your tenants might at some point wish to make changes to your property. Your lease should stipulate what changes can and cannot be made, and what changes require your consent. The Landlord and Tenant Act 1927 states that you cannot withhold consent unreasonably 4.

Note that the 1927 Act applies only in England and Wales, meaning that in Scotland there is no onus upon you to act ‘reasonably’ when giving or refusing consent for an alteration.

Summary

In conclusion, there is little if any onus on you to be responsible for any of the statutory repairs, maintenance or other responsibilities inherent in the management of a commercial property, so long as the property is occupied by a tenant. It is vital, however, that the division between your and your tenant’s responsibilities are clearly outlined in the lease agreement, in order to prevent confusion. You should seek advice from a legal professional to ensure that your lease is as watertight and comprehensive as it can be.

 References

  1. Landlord and Tenant Act 1985, ss 11–17
  2. http://uk.practicallaw.com/books/9781847665669/chapter03
  3. http://uk.practicallaw.com/6-107-6604?service=construction
  4. Landlord and Tenant Act 1927, s 3

This information should not be interpreted as financial advice. Commercial mortgage rates are subject to change. Speak to our advisors for a mortgage illustration.

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