Commercial Property

a. Property Maintenance and Repairs: Normally the landlord is responsible for the building and the tenant is usually responsible for their rented area, including fixtures, fittings, and any equipment or furniture they bring into the property. A landlord’s responsibility can include promptly making required repairs to ensure the property is safe, secure, and habitable for tenants and visitors. Typically, you will be responsible for repairing and maintaining the building’s structure, including flooring, roofs, and external walls. You will also be responsible for maintaining any communal spaces or shared amenities.

b. Health and Safety: To protect your tenants, workers, and visitors, you must adhere to health and safety rules. This includes compliance with fire safety (more on this below), electrical safety, and general health and safety standards.

c. Construction Laws and Regulations: If you are constructing or renovating a building, you must observe construction regulations. Building laws establish minimum building design and construction standards to ensure resident health, safety, well-being, energy efficiency, and accessibility requirements. You are responsible for obtaining all required permits and clearances for any construction work and ensuring compliance with building regulations.

d. Insurance and Property Taxes: You are typically responsible for organising and paying for building insurance and property taxes, though specific arrangements may vary based on the lease agreement. You must also obtain gas and electrical safety certificates and provide essential safety devices such as fire detectors and extinguishers.

e. Environmental Performance: From April 2023, renewing a lease on a property that does not meet the minimum Energy Performance Certificate (EPC) standard will be illegal. You are responsible for ensuring newly-let commercial properties have an EPC and meet the required standards.

f. Asbestos Management: The lease should specify whether managing asbestos is the landlord’s or the tenant’s responsibility. Whoever is responsible must follow relevant laws, regulations and guidance to ensure the safety of everyone in the building.

g. Fire Safety: You will always be responsible for fire safety in communal areas. The Regulatory Reform (Fire Safety) Order 2005 designates a ‘responsible person’ for fire safety in the premises, which is usually the employer if the property is a workplace, thus the tenant. However, depending on the lease’s specified provisions, you may be responsible for providing equipment such as fire blankets and fire extinguishers.

A contracted out tenancy, also known as “contracting out”, relates to the ability for the parties to agree by contract that certain provisions of the Landlord and Tenant Act 1954 will not apply to a commercial lease. The provisions in question relate to providing protection for the tenant to remain in the property at the end of the lease term; this is known as having security of tenure. Security of tenure provisions in the Act generally grant tenants the right to renew their lease at the end of the contractual term. However, by mutually agreeing to a contracted out tenancy, this automatic right is waived, meaning that the tenant would need to vacate the property once the lease expires.

To lawfully establish a contracted out tenancy, a formal process must be adhered to before the lease commences. This process involves the landlord serving a notice on the tenant, indicating their intention to exclude the lease from the security of tenure provisions. Following this, the tenant must make a declaration acknowledging their understanding and acceptance of the content of the notice; namely that the lease is being contracted out.

a. Tenant’s Repairing Obligation: The lease should define the extent of the tenant’s obligation to repair the premises.

b. Rent Review: The rent review clause should be constructed to reflect the rent that might be expected to be paid under the lease in the open market at the specified review date.

c. Option to Renew: The existence of an option to renew the lease.

d. Break Clauses: Break clauses that allow either party to end the lease prematurely.

e. Landlord’s Obligation: The landlord may have obligations for the provision of services, repairs, maintenance, or insurance. The lease may also require payments from the tenant related to these services. 

f. Term of the Lease: The term of the lease is crucial. This means clearly stating when the lease will start and end.

g. The Landlord and Tenant Act 1954: This provides certain protections for tenants. It ensures that a tenancy granted for business purposes continues in effect despite the expiry of its term. Under the lease you can specifically exclude the application of this protection.

h. Assignment: Depending on the lease terms, the landlord may be entitled to withhold consent to an assignment of the lease.

i. Insurance: The lease may require the landlord to keep the property and common parts insured against certain risks. This should be reflected in the terms of the lease.

The energy performance standard is determined by an energy performance certificate (EPC) which is required when a building is being sold or rented. This certificate must be given free of charge to the person who ultimately becomes the buyer or tenant. Furthermore, the energy performance rating of a building, as expressed in the EPC, must be stated in any advertisement of the sale or rental in commercial media.

The energy performance of a building is calculated using a methodology approved by the Secretary of State, which includes methods for calculating asset ratings and operational ratings of buildings. An “asset rating” is an energy performance indicator determined from the amount of energy estimated to meet the different needs associated with a standardised use of the building, while an “operational rating” is an energy performance indicator determined from the amount of energy consumed during the occupation of a building over a period of time and the energy demand associated with a typical use of the building over that period.

For a private rented commercial property, the minimum level of energy efficiency is currently at the time of writing an energy performance indicator of band E.

a. Planning Permission. Planning permission is one of the primary legal considerations. Prior approval is required for the proposed development from the local planning authority, particularly when the proposed development could impact the amenity of any adjoining premises. The planning authority needs to consider the potential impact of the proposed development and may require further information before granting approval.

b. Environmental Risk. Another essential consideration is the impact of the development on the environment and the community. This includes factors like transport and highways impacts, contamination risks, flooding risks, and the impact of noise from commercial premises.

c. Contract Terms. Contractual considerations are also crucial in commercial property development. For instance, if an option agreement for the purchase of land is involved, it may require conditions such as the provision of adequate natural light in all habitable rooms of the new dwellinghouses.

d. Tax. In terms of tax considerations, the nature of the property development activities may determine whether the business is classified as an investment or trading business, which can have different tax implications. Moreover, legal principles related to business property relief could also apply, especially if the property development involves self-catering holiday accommodation.

a. Lease agreements. Legal advice should be sought to ensure that clauses in the lease agreement provide adequate protection.

b. Lease agreements protected by the Landlord & Tenant Act 1954. Legal advice should be sought to ensure that relevant rights and responsibilities of such a lease are known.

c. Prior to the execution of a commercial property transaction. Legal advice should be sought prior to the execution of a commercial transaction to ensure that the transaction is legally sound and to mitigate any risk of litigation in the future.

d. Property development. Legal advice should be sought when planning a property development, especially if there are issues with tenants refusing to vacate the site or if there are questions about a tenant’s rights under a lease.

e. Valuation. Legal advice should be sought when dealing with issues related to valuation of a property.

f. Build around strategy for development. Legal advice should be sought when considering a ‘build around’ strategy for a development project.