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Latest News Guide to commercial landlord laws and regulations
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Guide to commercial landlord laws and regulations

Guide to commercial landlord laws and regulations

Landlords renting out commercial properties must ensure they abide by a host of rules and regulations to protect both the landlord and the tenant.

These laws govern the maintenance and safety of the property, as well as the landlord’s legal responsibilities to their tenant, their employees, and the general public.

In this guide, we’ll look at the rules for safety, maintenance, and how the Landlord and Tenant Act 1954 affects commercial landlords.

What is the Landlord and Tenant Act 1954?

The Landlord and Tenant Act 1954 (LTA) gives tenants of commercial properties rights of occupancy known as ‘security of tenure’ and sets out the leasing rules that both landlords and tenants of commercial properties must follow.

Tenants have the right to renew the lease and stay in the property after the end of the lease term, as long as they continue to pay rent and have not breached any terms of their tenancy agreement.

At the end of the lease term, the Act gives the tenant a legal right to apply to a court to begin a new lease term.

The LTA applies to both written and oral commercial tenancy agreements.

What does security of tenure mean in practice?

Security of tenure means that the tenant can continue to occupy the premises on the same terms and conditions as their original tenancy until it is either renewed or terminated, in accordance with the terms of the LTA.

Its intention is to provide tenants with the security of business continuity. Commercial landlords can only refuse to renew a lease for very specific reasons.

How can landlords refuse a lease renewal under the Landlord and Tenant Act 1954?

Commercial landlords can only refuse to renew a lease for a number of reasons specified in the Act, and only after serving a Section 25 notice.

The grounds for refusing a lease renewal, found under Section 30(1) of the Act, are:

  • the tenant’s failure to keep the premises in a good state of repair;
  • persistent late payment of rent;
  • other substantial breaches of the tenancy agreement;
  • provision of alternative premises on reasonable terms;
  • demolition, reconstruction or sale of the property;
  • the landlord can prove that they intend to occupy the premises for their own business.

Can a commercial landlord avoid the Landlord and Tenant Act 1954?

No, where the Act is not explicitly mentioned in the terms of the lease it will be assumed to apply.

However, it is possible for a commercial landlord to exclude the provisions of the LTA 1954, in agreement with the tenant and as long as the correct process is followed.

The rules governing an exclusion of security of tenure are set out in Section 38A, and specify that the lease must be granted for a fixed and ‘certain’ period of time.

For the exclusion to be legal, three key elements set out in the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 must be followed before the lease is completed.

  • The landlord must serve a warning notice set out in Schedule 1 of the Order.
  • The tenant must sign a declaration stating that they agree to the exclusion, similar to that in Schedule 2 of the Order.
  • The lease must contain a clause stating that both the landlord and tenant have agreed that security of tenure will not apply.

If these steps are correctly followed the tenant has no automatic right to remain once the lease has expired, and no right to compensation.

Gas safety responsibilities

The Gas Safety (Installation and Use) Regulations 1998 specify that installations and appliances should be inspected annually by a Gas Safe engineer, with records kept for a minimum of two years.

Both landlord and tenant may bear a legal responsibility for gas safety, and the terms of the lease should clearly set out which is responsible for gas installations and / or appliances.

Typically, the tenant is responsible for ensuring the safety of any gas appliance, installation pipework or flue installed in their workplace, while landlords should look after the safety of installations in any communal areas.

Failure to comply with the regulations could result in a large fine, or even imprisonment.

Electrical safety responsibilities

Commercial landlords have a legal responsibility to ensure that a property’s electrical installation, including wiring and fuse boards, are safe and maintained.

There is a duty of care to ensure all reasonable steps and precautions are taken to prevent personal injury to tenants, or damage to their property.

The Electrical Safety Council recommends that full testing is carried out every five years or when the tenancy changes, whichever is sooner.

Tenants are responsible for the safety of any electrical appliances bought or installed by them, and for undertaking risk assessments of their use of electricity and taking steps to ensure any employees are safe.

The lease should clearly set out who is responsible for what in regards to the electrical safety of the property.

Fire safety responsibilities

The Regulatory Reform (Fire Safety) Order 2005 imposes responsibilities for fire safety on the ‘responsible person’ with overall control over the premises.

The tenant will usually be deemed to be the ‘responsible person’, accountable for evacuation procedures and risk assessments, and that the premises, any fire safety equipment, and emergency exits are properly maintained and kept in working order.

However, the landlord should always include fire safety in any risk assessment undertaken and may be responsible for providing equipment – like fire extinguishers – depending on the terms of the lease.

Managing asbestos

The Control of Asbestos Regulations 2012 imposes responsibilities on the ‘duty holder’ for the management of asbestos.

Under most full repairing leases, the tenant will usually be specified as responsible but, in the absence of any clear definition, the law will place responsibility on the person who has the most control over the building.

The duty holder must take reasonable steps to find out if there is asbestos in the building and assess the risks of anyone being exposed to fibres.

It may not be necessary to remove the asbestos if the duty holder can identify and manage the risk, but any work carried out to the part of the building containing asbestos must be carried out by a licensed contractor.

Buildings constructed after 2000 should not contain asbestos, but if you are planning on carrying out building work on a property constructed before this then a risk assessment, including for asbestos, must be carried out before work is started.

Maintenance and repairs

It is a commercial landlord’s overall legal responsibility to ensure that those parts of the building for which they are responsible are maintained in a safe state of repair.

However, most commercial properties are let on a Fully Repairing and Insuring (FRI) Lease, which places the onus on the tenant for any repairs to those parts of the building that they occupy – as well as any costs to return the building to its original state at the end of the tenancy.

Tenants can undertake a survey at the start of the tenancy and ask the landlord to undertake work for any major structural issues before accepting the tenancy.

If a property is let to multiple tenants, the landlord will often retain responsibility for maintaining communal areas and the structural integrity of the building.

Fixtures and fittings

The landlord is legally responsible for the safety, installation, and maintenance of any fixtures and fittings that they own.

Tenants are responsible for the safety of, and maintaining, any fixtures and fittings they install.

This should be made clear in the lease.

Minimum Energy Efficiency Standards (MEES)

From 1st April 2018 new regulations made it a legal requirement for eligible rented properties to have an Energy Performance Certificate (EPC) rating of no worse than E.

It is unlawful to grant new leases on a commercial property which has an EPC rating worse than E, and from 1st April 2023 it will be unlawful to continue to let eligible commercial property which does not meet the minimum standards.

Premises rented for at least 99 years, or less than six months, are generally exempt from EPC requirements, as are listed buildings if the changes required would breach the terms of the listing.

Responsibility for commercial property insurance

The landlord is almost always responsible for arranging commercial property insurance, but they will normally pass the cost of this on to the tenant under the terms of the lease.

While the landlord is responsible for insuring the building, their fixtures and fittings, loss of rent, and property owners’ liability, the tenant is responsible for their own contents and public liability, plus any improvements they have made to the building.

Landlords may also consider additional cover, including:

  • legal expenses;
  • malicious damage and theft by tenants;
  • employers liability, legally required if they employ someone in relation to the property.

Read more about commercial property insurance.

It is worth bearing in mind that landlords must meet all of their legal responsibilities, or their insurance cover could be invalid if they came to make a claim.

Any terms in the lease agreement do not override any of the legal obligations noted above.

 

For more information, read our complete guide to being a commercial landlord, and our guide to commercial landlord’s responsibilities.

There is plenty more advice for domestic and commercial landlords on our landlord hub, along with a comprehensive range of policy information.


Legislation and guidance included in this article is correct as of June 2022. Please note that legislation does change, it is always best to check the most up to date guidance on gov.uk.

Related products: Business Insurance Commercial Property Insurance Unoccupied Commercial Property Insurance Managing unoccupied commercial properties

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