Key Responsibilities of Commercial Landlords: A Quick Guide to Compliance and Management

As a commercial landlord, it can often feel like you're navigating a maze of obligations and responsibilities. This line of work requires careful attention to detail and a well-drafted, clear lease. Knowing exactly how your buildings are being used by tenants is also an essential 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 cover various aspects of the property you are leasing. These responsibilities are designed to protect both the landlord and the tenant and are, for the most part, governed by the lease itself, forming a binding legal contract between you and your tenants.

Health and Safety Responsibilities

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

The key aspects of health and safety responsibilities include:

• Maintenance and Repair: Depending on the extent of the demise and the terms of the lease, landlords may be responsible for maintaining and repairing any structural or communal parts of the building. However, it is most common to pass repair responsibility on to the tenant for the parts of the property that they are responsible for under the lease. For example, in an internal-only demise, there may be a positive obligation on the landlord to maintain the structure/exterior of the building or any common parts of an estate, sometimes in return for a contribution towards the service charge.
   
• Electrical Safety: Responsibility for ongoing electrical safety for the property will depend on the terms of the lease; however, it is common for this to be passed on to the tenants. Before you let out a building, you must ensure that the electrical systems are safe for occupation. Therefore, you should have an up-to-date Electrical Installation Condition Report (EICR) for the property provided by a registered electrician, who will also need to inspect the property at least once every five years.
   
• Gas Safety: The responsibility for gas safety usually also falls to the tenant, depending on the terms of the lease agreement. They should arrange regular gas safety inspections. However, if you have arranged for any new plant to be installed before the property is let, you should ensure that a suitably qualified gas engineer carries out this work and that the appropriate certification is issued. These items should be inspected annually and re-certified.

Asbestos Management

Asbestos management falls to the "responsible person," usually the occupier. This responsibility is, therefore, often passed to the tenant. If asbestos is discovered in the property, the tenant must comply 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.

If the property is empty or the asbestos is found outside of the demised area, this responsibility will remain with the landlord. Therefore, obtaining an appropriate assessment survey is often sensible before letting out the property.

Fire Safety

Tenants are responsible for fire safety within their demise. 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.

Energy Efficiency

As of April 2023, commercial landlords must ensure that their properties have a minimum Energy Performance Certificate (EPC) rating of E. Letting out a property that does not meet this standard is unlawful and can lead to fines. The Government intends to raise this rating for lettable commercial properties to "C" at some stage in the future. Raising this rating by making small, inexpensive changes is often possible. Please refer to the recommendation report that comes with the EPC to see if any of these apply to your property. Any work required to improve this rating will remain with the landlord.

Insurance

Commercial landlords are typically responsible for arranging building insurance. This provides financial security in the event of property damage. It is standard to charge the premium (or a proportion of it, where the property is multi-let) to the tenant(s), depending on the terms of the lease.

Understanding the Lease Agreement

The lease agreement forms the fundamental terms of the landlord-tenant relationship. It details the conditions and covenants 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's essential to understand and abide by the terms of the lease agreement. Failure to do so could lead to legal disputes or financial penalties.

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:

• Take professional legal advice on the drafting and interpretation of your lease agreements. Although they may seem straightforward, these are complex legal contracts that are often misdrafted, leading to confusion, disputes, and litigation. Spending money at the outset on preparing a suitable document can save you thousands of pounds later.
   
• Regularly review and, upon renewal, consider updating your lease agreements to ensure they reflect current laws and regulations.
   
• Conduct regular inspections of the property to identify any maintenance or repair issues.
   
• Where required, engage professionals for regular safety inspections and maintenance of gas, electrical, and fire safety systems.
   
• Keep open communication lines with your tenants to promptly address any concerns or issues.

Conclusion

Being a commercial landlord comes with a host of responsibilities. By understanding your obligations and ensuring your properties are safe, well-maintained, and legally compliant, you can create a positive relationship with your tenants and ensure the longevity of your commercial properties. Remember, the obligations of a commercial landlord are not just legal requirements but also essential elements in protecting your investment and the well-being of your tenants.

To speak with a member of the Commercial Property team, please contact Jenny Colvin, Partner, on 023 9277 6558 or email jennycolvin@warnergoodman.co.uk.