The UK has a wealth of commercial properties leased or rented for business purposes from landlords, including restaurants, pubs and bars, warehouses, salons, serviced offices, retail outlets and more.
In this blog, we talk about your responsibilities when leasing or renting commercial properties as a landlord or a tenant.
What’s the difference between leasing and renting a commercial property?
Commercial leases are typically longer-term arrangements lasting 12 months or more.
This arrangement offers both the landlord and the tenant more security than renting.
For the landlord, it means a more regular income and a reduced likelihood of the property becoming vacant, but it may be more difficult to alter terms and raise rent when required even if your contract has a rent review clause. It is also more difficult to evict problem tenants.
Commercial rental agreements typically last 30 days, automatically renewing at the end of each interval.
This arrangement offers both the landlord and tenant more flexibility than leasing but lacks stability for both parties.
Landlords are better able to evict troublesome tenants and change terms (including raising rents or asking a tenant to vacate the property) but, if a tenant gives notice, a property may lie vacant until another is found.
Both agreements outline the specific activities permitted within the premises, who is responsible for what, and your rights as a tenant or landlord.
Altering terms
- The terms of commercial leases can be altered within the lease agreement if both parties agree to it, or at the end of the lease period
- The terms of a rental agreement can be changed at the end a cycle before it rolls over if sufficient notice is given (usually 30 days) or when a new tenant is taking up occupancy
Any changes to terms need to be within the law.
What are landlords and tenants responsible for?
Although specific responsibilities vary greatly and can overlap, below we outline what each party may typically be responsible for.
As a landlord, you have a duty of care to ensure your property is safe for your tenant and those using the building, such as clients, customers, people making deliveries and employees of the tenant.
You are usually responsible for:
- The safety and maintenance of all fixtures owned by you such as heating, gas, plumbing and lighting systems. Fixtures are defined as all physical items that are permanently attached to the property, so would include a fitted kitchen but not a picture hung on the wall with a nail
- Communal areas, such as lobbies, stairs, carparks and corridors, or other facilities shared between several tenants
- Ensuring that properties have an Energy Performance Certificate (EPC) rating of E or above
- Structural repairs such as foundations, flooring, the roof and exterior walls
As a tenant, you are usually responsible for:
- Health and safety – carrying out risk assessments and controlling hazards
- Gas and electrical equipment safety – maintaining appliances installed by the landlord according to the manufacturer’s instructions and arranging safety inspections as appropriate. Tenants are usually fully responsible for any equipment they have had installed themselves
- Non-structural repairs, such as air conditioning or plumbing
- Keeping the property in good condition, including making minor repairs and ensuring gardens and outdoor areas are kept tidy
Tenants are also responsible for ensuring the working environment is safe. This could include providing:
- A reasonable temperature
- Adequate space, ventilation and lighting
- Toilets and washing facilities
- Drinking water
- Safe equipment
The management of asbestos can lie with the landlord or the tenant, but whoever is responsible will need to protect everyone in the building as per the Health and Safety Executive’s guidelines.
Fire safety requires one individual to be the ‘responsible person.’ This could be the landlord or the tenant depending on what is specified in the agreement and the duty of care could be shared. For example, the landlord may provide fire blankets and extinguishers, but the tenant may be responsible for ensuring they are accessible and safe to use. The landlord is always responsible for safety in communal areas.
Tenancy and the law
In England and Wales, there are two main laws covering tenancy and one covering workplace health and safety.
The Landlord and Tenants Act 1985 sets out rules regarding:
- Duration of tenancy and notice periods for contract termination
- The process for determining a fair rent
- Who is responsible for repairing and maintaining the property and fixtures
- The rights of the landlord to access the occupied property
- The landlords’ obligations, including the provision of essential services such as sanitation
- The tenants’ rights, including the right to a written tenancy agreement and protection against unfair eviction
The Occupiers’ Liability Act 1957 and the Occupiers’ Liability Act 1984 both govern liability for injury caused or damage done to persons or their property while on the premises, caused by the defective or dangerous condition of the premises:
- The 1957 Act generally relates to those who have lawful permission to be on the premises
- The Act was updated in 1984 to include unauthorised people, including trespassers, who did not have permission to access the premises
The Health and Safety at Work etc. Act 1974 sets out the general duty of care of:
- Employers towards employees and members of the public
- Employees to themselves and to each other
- Certain self-employed people towards themselves and others
The Code for Leasing Business Premises in England and Wales 2007
In addition, there is a code for leasing business premises which sets out best practice for commercial landlords and tenants. It is not legally binding but is authorised by some regularity bodies.
The code covers:
- Alterations and changes of use
- Assignment and subletting
- Insurance
- Lease negotiations, rent reviews, term lengths, renewal rights and break clauses
- Ongoing management and service charges
- Rent guarantees and deposits
How AGR Law can help commercial landlords and tenants
Commercial property law is complex with many variables. To protect your interests as a landlord or tenant, we strongly advise that agreements are outlined in a solicitor-written contract which is signed by both parties before the tenant takes up occupancy. This will ensure:
- Terms are negotiated to be fair, legally compliant and accurate
- Legal terminology is fully explained so you understand your rights and responsibilities
- All points will be covered to avoid disputes that could lead to lengthy, stressful and expensive court proceedings as well as disrupted business operations
Contact our team at hello@agrlaw.co.uk or call us on 0116 340 0094 if you need support with any matter relating to commercial property.