If you have a commercial property to let, there are a number of factors to take into consideration regarding your legal responsibilities.
Everything you need to know
As a landlord who owns a property and receives rent from tenants, you are responsible for the health and safety of what happens within your property. This means that all utilities in the building like electricity, gas, and water supply should meet with current government guidelines.
As a landlord, your main goal is to maximise your rental income while at the same time keeping the property in a ‘fit for lease’ state so that it keeps its market value.
In this guide to letting commercial properties, you can find out your responsibilities and rights as a commercial landlord.
Your responsibilities as a commercial landlord
It is very important to know your responsibilities as a commercial landlord before leasing or letting your property. This will help you make sure that you fulfil your legal obligations and keep a good relationship with your commercial tenants.
Health and Safety
One of your main obligations as a commercial landlord is to carry out a health and safety risk assessment. This will identify any hazards and remove them to make the property safe. The health and safety risk assessment will check the following:
- Gas safety. You must have all gas appliances regularly checked every year by a licensed gas engineer. All gas connections like fittings, pipes, and flues are checked that they meet the Gas Safety (Installation and Use) Regulations 1998. You should make the gas safety certificate available for your tenants upon request.
- Fire safety. As a building owner, you have the responsibility to ensure that all fire safety regulations are met and followed by the tenants. This calls for close coordination between you and your tenants to make sure that all leaseholders are aware of their responsibilities. All buildings build after 1992 must have mains-powered smoke alarms fitted.
- Electrical equipment. In some cases, you should have all electrical appliances tested. Even if this is not a legal requirement for the type of lease you provide, it shows you are a good landlord if you keep electrical equipment in good order.
- Asbestos management. The commercial property lease should state who is responsible for any asbestos on the property. Asbestos should be properly managed in harmony the government regulations.
Generally, any fixtures and fittings you have installed should be in good working order at the start of any lease. Depending on the conditions of the lease, the leaseholder may become responsible for the upkeep of certain aspects of workplace safety. However, government legislation puts more of a responsibility on commercial landlords for health and safety. Therefore, it’s essential to have a comprehensive lease agreement where all aspects are covered.
Other aspects of health and safety that commercial landlords are responsible for are:
- making sure there is enough space, ventilation, and lighting for tenants to operate their business
- provide toilets and washing facilities, as well as adequate supply of drinking water
- keeping a reasonable temperature inside the building
As a commercial landlord, it is your responsibility to care for maintaining the building and its structure in a safe condition. Generally, you are responsible for the fabric of the building to keep it wind and watertight.
Depending on the lease agreement, some of the internal maintenance could be shared by you and the leaseholder(s). For example, they could pay you a fee for cleaning and maintenance services that you provide. Or, the lease could state that they have to arrange for regular cleaning.
You should also make tenants aware of their responsibility to promptly inform you of any urgent maintenance issues. For example, a leaking pipe could quickly become an emergency if it bursts and causes water damage to the property.
Commercial property insurance
Generally, there is no obligation to arrange commercial property insurance unless your mortgage lender requires it. However, there are many good reasons to have adequate insurance to cover any loss from fire, vandalism, or accidents that happen on your property.
If you have commercial property insurance, then you should let your insurer know if the premises are let.
If you employ anyone to maintain or oversee your commercial premises, then you need employers’ liability insurance with a minimum of £5 million of cover.
Lease or license for commercial properties?
There are two main types of lease agreements when it comes to letting commercial properties.
- Lease. This is a rental agreement for a fixed period of time. The advantage of a lease is that it gives you long-term stability and security. The lease should also stipulate any break clauses in case you or your tenant needs to end the lease before its term.
- Licence. A licence offers more flexibility for leasing your property and is a good option for letting your property on a short-term basis. This can be the best option to offer start-ups or small businesses that need short-term property occupations. Licences are generally cheaper than leases. However, a licence doesn’t offer you guarantees about long-term occupancy.
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