Landlord’s Obligations In A Commercial Lease

emily gordon brown
Emily Gordon BrownLegal Assessment Specialist @ Lawhive
Updated on 23rd November 2023

As a commercial tenant or landlord, it is common to question what you are responsible for and the legal requirements within a commercial lease. It is important to know your accountabilities so that any issues can be dealt with quickly, and to avoid any potential problems in the future.

landlords-obligations-in-commercial-lease

In this guide, we will cover everything you need to know about commercial leases. We will focus on a landlord’s obligations in a commercial lease, including:

  • What you need to know to stay on the right side of health and safety 

  • Whether commercial landlords need insurance

  • Who is responsible for fixtures & fittings

  • How to know if you’re responsible for gas & electricity 

  • What to do about asbestos if it’s discovered in your property

Landlord’s obligations in a commercial lease

Landlords have a number of duties towards their tenants which are contained within a commercial lease. If they do not follow these, they could be breaking the rules of this lease.

If a commercial landlord doesn't follow the rules, they could stand to breach their contract and be taken to court or face financial penalties.

The areas of responsibilities in a commercial lease depends on the type of lease. There are several types of commercial leases that landlords and tenants can use to structure their rental agreements. The choice of lease type depends on the needs and preferences of both parties.

UK commercial property law dictates the legal responsibilities of a landlord across the length of a commercial lease. These are wide ranging and cover everything from fixtures and fittings, including home improvements; health and safety; gas and electricity. 

As a landlord, it is important to:

  • Know what your legal responsibilities are

  • Create a positive relationship with tenants

  • Extend the life of a property

There are a range of different legal responsibilities that a landlord has. Here, we will provide an overview of each responsibility.

Health and safety

Commercial landlords have a duty of care to their tenants. Ensuring the safety, security and health of tenants is central to the law and legislation. Often, the greatest duty will be on the tenant, but a landlords’ duty will depend to a large degree on the type of lease.

The main health and safety responsibilities for landlords include:

  • Maintenance and repair of any fixtures and fittings they own

  • Maintenance of the electrical system

  • Compliance with gas safety responsibilities 

Failure to comply with gas safety responsibilities can lead to fines and even imprisonment, as well as putting tenants at risk. So, this is an area to absolutely ensure is right.

Communal areas may be a responsibility of the landlord depending on the lease, and you they may also be expected to deal with asbestos.

As mentioned, not everything under the health and safety umbrella is the landlord’s responsibility.

As per the Health and Safety Act 1974, it is the tenant’s duty to:

  • Maintain a reasonable temperature

  • Provide adequate lighting, space and ventilation

  • Make safe drinking water available

  • Provide suitable equipment for staff

  • Maintain toilets and sanitary facilities 

Repairs and maintenance 

The lease agreement will set out the landlord’s responsibilities for repairs and maintenance. Typically, commercial landlords are responsible for the structure of the buildings they rent out, which include foundations, flooring, ceilings and the exterior walls. Tenants are often responsible for internal systems such as air conditioning or ventilation and plumbing.

The tenant is also required to keep the building in a good condition. This can also be the case even if the property is not in a good condition when the tenant took up the lease. This is what’s known as a ‘full and repairing lease.’

Insurance

Yes, a commercial landlord needs insurance no matter the type of property they are leasing to tenants. Usually, landlords pay insurance costs upfront and price these into the fees they charge tenants to recover their costs.

For landlords it is important to make sure the property is insured at the right level. Being underinsured can lead to damaging financial repercussions.

It’s crucial to get insurance that is appropriate to the building and which covers any losses if damage occurs. This will help a business bounce back and carry on as normal if exceptional circumstances were to arise.

Fixtures and fittings

As mentioned above, a commercial landlord is responsible for all the fixtures and fittings they own. Fixtures are items that are in a fixed position within a building, for example heating and plumbing units. Fittings are usually attached to the wall by nails, think a picture frame or a TV bracket.

The tenant is responsible for the maintenance of all the fixtures and fittings they have installed, for example a bakery might place new ovens in their rented premises. The full details of these will be established within the commercial lease signed by both parties.

Fire 

Commercial landlords or commercial tenants may have responsibility for fire safety in their lease. Responsibility for fire safety is shaped by details of the lease. Most leases place responsibility on the tenant to ensure compliance with fire safety regulations.

The Regulatory Reform (Fire Safety) Order 2005 sets out that a ‘Responsible person’ has the duty for fire safety within a commercial property. This is typically the tenant, so in a commercial tenancy, the employer.

The responsible person will usually be a fire safety professional hired by their employer to ensure compliance and the safety of the organisation’s people. The landlord, depending on the lease, may have responsibility to ensure fire safety equipment is provided (fire blankets, extinguishers). In short, fire safety might be the responsibility of tenants, landlords or both.

Gas and electricity

Responsibility for gas and electricity depends on the lease; it can lie with either the landlord or the tenant, or both.

The tenant is usually responsible for maintaining gas equipment (the boiler, the stove, gas oven). Practically, this means the tenant should arrange an annual gas safety inspection from a registered gas safety engineer. As with fittings, tenants are also responsible for maintaining any gas equipment they have installed.

The commercial landlord’s obligations include ensuring the property’s electrical systems are safe to use, for example the wiring and are typically responsible for all gas and electrical installations in communal areas.

The Landlords and Tenants Act 1985 emphasises that a commercial property’s electrics must be ‘safe at the beginning of the tenancy’ and ‘maintained in a safe condition for the duration of the tenancy’. 

From April 2023, commercial landlords are responsible for ensuring their property has an Energy Performance Certificate rating of at least E.

It is illegal to rent out a premises without the minimum rating, E.

This duty of care extends to anyone who visits the property, not just the tenant. This is laid out in The Occupiers' Liability Act 1957 and The Occupiers’ Liability Act 1984. This responsibility is more important when tenants operate commercial properties where a lot of people visit regularly, such as shops, office buildings or restaurants and hotels.

As these responsibilities are legal duties, a commercial landlord can face prosecution under the Occupiers’ Liability Acts if they fail to maintain their electrical systems in a safe condition.

Asbestos

A commercial landlord must check for the presence of asbestos before renting out their property. Asbestos being present does not mean a property can’t be rented out, however the Health and Safety Executive (HSE) will need to be informed. Following this, the landlord will need to carry out a full risk assessment and follow the HSE’s advice to ensure future tenants will be safe to occupy the building. 

Landlords that don’t mitigate the risk of asbestos can be penalised under law.

Code for leasing business premises in England and Wales

The code for leasing business premises in England Wales 2020 RICS sets out the responsibilities of landlords and tenants. The code does not contain legal obligations; however it is followed by authorised regulatory bodies: The British Council for Offices, the British Retail Consortium and the Confederation of British Industry.

The code addresses: 

  • Lease negotiations

  • Management and service charges

  • Alterations and changes of use

  • Insurance

  • Rent reviews

  • Term lengths, renewal clauses, break clauses

Need support? Get in touch with our experts

At Lawhive, our commercial property solicitors are on hand to help commercial landlords and tenants understand their rights and responsibilities under UK law when it comes to commercial landlords’ obligations.

For specialist help and guidance specific to your case, get a free legal assessment from our expert team today to get started.

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