A tenant must comply with a variety of obligations during their commercial tenancy. Some of these will be contractual and others will be statutory in nature. Failure to comply usually carries the risk of legal action and, in some cases, criminal sanctions. Therefore, understanding these obligations is a crucial consideration for any business tenant.
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Tenant compliance relates to the legal duties of a commercial occupier whilst party to a lease and in legal possession of a premises.
The legal obligations may be statutory or contractual in nature and it is not uncommon for severe penalties to be imposed for failure to comply with them.
Tenants must carry out health and safety risk assessments in the workplace and take action to remove any hazards.
Normally they will be responsible for:
Tenants are also responsible for providing:
If tenants do not follow health and safety rules they can be prosecuted. The Health and Safety at Work Act 1974, is the main piece of legislation covering this area of commercial tenancies.
The Health and Safety Executive and local councils are responsible for making sure tenants follow this law.
Conversely, landlords will have some responsibility for health and safety in communal areas. Tenants are advised to take reasonable steps to ensure their landlord fulfils these responsibilities. Often, dispute can arise from a party not addressing their areas of responsibility. It is important to remember that tenants should always continue to pay their rent through a period of dispute, otherwise they may be in a position to forfeit their lease.
The lease should state who is responsible for repairs and maintenance of a property. If tenants are only renting part of a landlord’s building, such as an office block, they may also have a responsibility to contribute to the upkeep and maintenance of common parts of the building. This may be for the roof, structural walls, lifts or other areas that are used in common with other occupiers of the property. All of these costs are collectively referred to as the Service Charge.
Tenants will also be responsible for contributing to the costs of the insurance premium for the premises. This is in order to cover any damage to the premises and to recover any loss of rent the landlord may suffer if the premises were to become unusable due to such damage.
There can be a cost incurred for a commercial occupier wishing to assign their lease, or sublet their property to someone else, and both of these will usually require the landlords written permission. The landlord can normally request that any professional costs required to consider an assignment or sublet are covered by the outgoing tenant, along with any solicitors’ fees incurred during the process.
Tenants are usually responsible for all utilities in relation to their premises and they should always obtain meter readings at the start and end of any occupancy.
When moving out, tenants will usually have to undertake certain repairs, which are called dilapidations, and they will generally return the property to the state that it was taken when the tenant first entered it.
Dilapidations, or reinstatement liabilities, will always be written into any lease. Before signing a lease, tenants should familiarise themselves with its terms and dilapidations implications.
During the lease term, tenants should consider the future dilapidations liability and budget for it accordingly. For example, if alteration works are carried out within the premises, then it is likely that the landlord will require the tenant to reinstate the alterations before the lease ends.
Business rates are charged on the majority of non-domestic properties, such as shops, offices, pubs, warehouses and factories. Tenants will usually have to pay business rates if they use a building or part of the building for non-domestic purposes.