Becoming a commercial landlord comes with important responsibilities and obligations when granting a lease to a potential tenant. Whether you own a portfolio of residential properties, retail establishments or office buildings, understanding and fulfilling these responsibilities is crucial for maintaining positive tenant relationships, adherence to legal requirements, and safeguarding your investment. This blog post details some of the key responsibilities of a commercial landlord.

Repairs and Maintenance

A fully repairing and insuring lease (FRI lease) will set out the landlord’s obligations as to repairs and maintenance of their property. However, these obligations vary depending on whether the landlord grants a lease of the whole of the property or demises part of a property which forms part of a larger property. If the landlord has granted a lease of whole, the tenant will have the full responsibility to repair the whole of the property. The tenant is also responsible for covering the cost of all repairs and having those repairs made. Where the landlord has granted a lease of part, the lease will also impose obligations on the tenant to repair the property, but the tenant will also indirectly bear responsibility for the cost (or a proportion of the cost) of any repairs to the property’s exterior and common parts by way of payment of a service charge. It is, therefore, important to check the repair and maintenance provisions in the lease to clarify who is responsible.

The repair and maintenance provisions in the lease are important from the landlord’s perspective as the landlord’s interest is long term as they own the reversionary interest (a capital interest) in the property. A poor state of repair of the property will affect the value of their reversionary interest and may lead to a capital loss. It will also affect the ability of the landlord to let the property to future tenants and thus may lead to a loss of income.

Insurance

A commercial landlord will usually be responsible for insuring the fabric and structure of their commercial premises. It is the landlord who has invested capital in buying or constructing the premises so commercial landlords are typically responsible for arranging building insurance. This provides financial security for the landlord by making sure that they will receive a payment if the property becomes damaged or destroyed.

The lease will be drafted to contain a comprehensive list and a definition of the insured risks which the landlord will be required to insure against. Like the repair and maintenance provisions, the lease will also provide a covenant requiring the tenant to reimburse the landlord for the insurance premium which is to be payable as rent. The tenant will also be responsible for paying for consequential items such as any excess on the policy, the premiums for loss of rent insurance and insurance valuations.

Compliance with Building and Safety Regulations and Energy Efficiency

As a commercial landlord, you will be responsible for ensuring that your property is safe and habitable which involves complying with building and safety regulations. This includes fire, electrical, gas, and water safety.

It is a legal requirement that landlords must ensure that all properties have a valid Energy Performance Certificate (EPC) and that the rating is at least E. Unless the property is exempt, it will be illegal to let out a property that does not meet the required standard. Landlords must provide new tenants with a copy of the property’s EPC when they move in.

If you need help or advice about your responsibilities as a commercial landlord, please contact our Commercial Property Solicitors for further advice and assistance on 01604 828282 or email info@franklins-sols.co.uk.