Commercial landlord laws and regulations

Navigating the complex terrain of commercial landlord laws and regulations can be a daunting task. These laws are designed to balance the interests of landlords and tenants, ensuring that the leasing and operation of commercial property are conducted fairly and legally. 

Here, we provide an overview of the key aspects of commercial landlord laws and regulations, highlighting essential areas such as lease agreements, tenant rights, dispute resolution and the obligations that commercial landlords have towards tenants. 

Health and safety

Let’s begin by taking a look at one of the most important aspects – health and safety. 

Commercial landlords are tasked with the significant responsibility of ensuring their properties are safe, secure, and healthy for tenants. This duty of care is embedded within various laws and legislations, designed to protect tenants and maintain standards across commercial properties. 

While tenants often bear a substantial part of the duty regarding their specific operations and the interior condition of the premises, the extent of a landlord’s responsibilities can vary significantly, depending on the lease agreement’s specifics.

Fixtures and fittings

The term ‘fixtures’ refers to items attached to the property, such as heating or lighting systems, for which the landlord is responsible, ensuring they are safely installed and maintained. 

‘Fittings,’ however, are items not permanently attached, like decorations hung on the wall. Tenants are responsible for the safety and upkeep of any fixtures and fittings they install. This is a detail that should be clarified in the lease.

Gas and electricity

The allocation of responsibility for gas safety can fall to either the landlord, the tenant, or both, depending on the lease conditions. Tenants typically handle the maintenance of gas equipment, adhering to manufacturer instructions and organising annual inspections by registered gas safety engineers. 

Landlords must ensure the property’s electrical systems are safe, in line with the Landlord and Tenants Act 1985 and Occupiers’ Liability Acts of 1984, which extend the duty of care to anyone visiting the property.

Maintenance and repair

The lease should clearly define the maintenance and repair responsibilities of each party. Landlords generally cover structural repairs, while tenants are responsible for non-structural repairs and maintenance unless specified otherwise in the lease. 

Commercial leases often require tenants to maintain the property in good condition, regardless of its state at the lease’s start, under what is known as a “full repairing and insuring lease”.

Asbestos management

Responsibility for managing asbestos risks is determined by the lease. The responsible party must adhere to Health and Safety Executive guidance to ensure everyone in the building is protected. Neglecting asbestos management can result in severe penalties.

Fire safety

Under the Health and Safety at Work etc. Act 1974, tenants bear the responsibility for meeting Fire Safety regulations and maintaining a safe working environment. This includes: 

• Ensuring a reasonable temperature
• Adequate lighting
• Space
• Ventilation
• Access to drinking water
• Safe equipment
• Appropriate toilets and washing facilities 

Also, it is worth mentioning that the Regulatory Reform (Fire Safety) Order 2005 designates a ‘responsible person’ for fire safety in commercial properties, which is typically the employer or tenant. The landlord may be responsible for providing certain fire safety equipment, depending on the lease terms, but is always responsible for fire safety in communal areas.

Energy performance

Landlords must ensure that newly let commercial properties have an Energy Performance Certificate (EPC) rating of E or above and regulations from April 2023 making it illegal to renew a lease on properties that do not meet this standard.

Lease agreements

Lease agreements are the cornerstone of the relationship between a commercial landlord and tenant. In the UK, commercial leases are highly customisable and can vary significantly in terms of length, terms, and conditions. 

Unlike residential leases, there is less statutory protection for tenants, and the terms are largely determined by the lease agreement itself. Key aspects typically covered in lease agreements include:

• Rent
• Lease duration
• Repair obligations
• Terms for renewal

Both landlords and tenants must have a clear understanding of the lease terms. Landlords should ensure that leases comply with relevant laws, including the Landlord and Tenants Act 1985, which provides certain protections for commercial tenants, such as the right to renew a lease under specific conditions. Let’s discuss this in more detail below. 

Rent reviews and increases

As mentioned, commercial leases often contain provisions for rent reviews, allowing the rent to be adjusted at specified intervals. The method of review (e.g. linked to market rent, inflation, or a fixed percentage increase) should be clearly outlined in the lease agreement. Landlords need to follow the agreed process and provide adequate notice to tenants before any increase.

Ending a lease

Ending a commercial lease can be done in several ways, such as expiry of the lease term, break clauses, forfeiture for breach of lease conditions, or surrender. Landlords must follow legal procedures when ending a lease, especially if seeking to evict a tenant for breach of lease conditions.

It’s always recommended to seek legal advice when drafting or signing a commercial lease, as a well-structured lease agreement is fundamental to a successful landlord-tenant relationship.

Dispute resolution

Disputes between commercial landlords and tenants can arise for various reasons, including lease terms, rent increases, and repair obligations. The lease should specify a procedure for resolving disputes, which may include negotiation, mediation, or arbitration. Resorting to legal action should be a last resort due to the cost and time involved.

Commercial landlord insurance

Although commercial landlord insurance is not a legal requirement for commercial landlords, it is still essential in keeping your commercial property safe and covered. Typically, it’s up to the landlord to arrange commercial landlord insurance, ensuring the building, its fixtures, and fittings are covered. However, it’s quite common for the costs associated with this insurance to be passed on to the tenant through the lease agreement.

As a landlord, you’ll be ensuring not just the physical structure, but also covering potential loss of rent and property owners’ liability. On the flip side, tenants will need to look after their contents insurance, public liability, and any insurance related to improvements they’ve made.

Staying on top of your legal responsibilities as a landlord is crucial. Not only does it keep you in good standing legally, but it also ensures your insurance remains valid and effective when you need it most. Remember, the terms of any lease agreement can’t override these legal obligations. So it’s important to familiarise yourself with the ins and outs of what’s required.

Resources

There are many useful resources available to you, as a landlord, that will help you ensure that you have covered all of your bases with your commercial property. We have provided a comprehensive list of easily accessible resources for you below. 

• Code for leasing business premises in England and Wales: sets out the responsibilities of both landlords and tenants. 
• Landlord and Tenants Act 1985 
• Occupiers’ Liability Acts of 1984
• Health and Safety Executive guidance
• Health and Safety at Work etc. Act 1974
• Fire Safety (England) Regulations 2022
• Regulatory Reform (Fire Safety) Order 2005
• Energy Performance Certificate (EPC)

These responsibilities are crucial not only for the safety and well-being of tenants but also for ensuring that commercial landlords comply with UK laws and regulations. Failure to adhere to these duties can lead to legal consequences and put tenants’ health and safety at risk. So, understanding and fulfilling these obligations is paramount for landlords in the management of their commercial properties.

For more information on commercial landlord insurance, contact us at CIA Landlords on 

01788 818 670 today!