Congratulations, you’re a tenant! Now what?
Solicitor Sarah Loan explains the responsiblities which a tenant needs to consider when entering into a lease.
There is a lot to take in as a tenant at the beginning of your Lease, and it can often come at a busy time for your business (as you install your new or existing business into the Property).
Your obligations very much depend on the specific terms, and sometimes the type of your Lease. These are specific to each transaction, and are things which a solicitor can advise you about as part of the process of conducting due diligence and negotiating your Lease.
Your intended use of the Property and specific circumstances can have important implications. This brief article cannot and could not cover everything you might need to do, but hopefully it will be a useful starting point!
Your first steps are much like purchasing a home - you should check the Utilities are functioning correctly, and, unless you are being billed for utilities by your Landlord, take a meter reading and set up the appropriate billing mechanisms. Once invoices relating to your heating, water and electricity are raised, be sure to pay on time to avoid Landlord involvement.
Specific to a Lease, you should also ensure that you set up a mechanism to pay your Rent (which is usually payable in advance). You should also pay any VAT on your rent if a VAT receipt is provided and the Landlord has “Opted to Tax”- as Solicitors we usually consider this as part of standard enquiries raised of the Landlord’s Solicitor. Failing to pay your Rent or any part of it can result in your Landlord having rights to terminate your Lease at your cost.
Repairs and Alterations
Although you may be tempted to begin renovating at the beginning of your Lease, you should ensure that you have the right to do so under the Lease, and in particular:
- Keep any parts of the Property you are responsible for in the correct condition to avoid hefty “dilapidations” claims at the end of your Lease.
- Get the Landlord’s consent (if and where Lease says it is needed) for any works to the Property (including internal alterations) during the Term.
Consider that you will likely need to remove/reinstate any alterations you do make at the end of the Term, and bear in mind the affect any alterations have on the efficiency rating of the Property in relation to any works you undertake.
Leases which have been put in place more recently may require that a new EPC is provided by the Tenant in respect of any works causing a change in efficiency rating. Given the Government stance on EPCs and likely future requirements, alterations which would decrease the efficiency rating of a Property should be avoided at all costs.
If you will have Employees at the Property:
(Or even if you do not), you should undertake a Health and Safety- Risk Assessment. Where relevant, that should include considering :
- Asbestos- if the Property was built before 2000, check that there’s a management plan in place, or that there is no asbestos (again, this can be raised as part of a Solicitor’s due diligence). Where your Landlord has a management plan, you should note that you (as an employer) may become liable to comply with that whilst you occupy (or have a right to occupy) the Property.
- Legionella- broadly, the obligations relating to Legionella mirror those relating to Asbestos. If you supply drinking or other water to employees or members of the public, particularly the vulnerable, you should consider testing at regular intervals to ensure that your water supply remains free of Legionella.
- Gas and Electrical Safety – again, if you have employees, this is your responsibility, though your Landlord may be responsible for any necessary repairs for part or all of the service media at the Property (this is more usual where you have a lease of part of a Property only, as a general rule of thumb).
- Pest and Vermin infestations – there is no definitive or “usual” answer to the issue of infestations at the Property, but generally the Landlord should provide a Property free of infestation and then the Tenant should ensure that they do not cause infestations during or at the end of the Tenancy. However, if, for example, the Property has become infested because it is unfit (holes in the walls, drains which do not work, etc), then the Landlord is likely responsible to comply with any suggestions as to maintenance going forward.
- General Environment - you should ensure that your employees have:
- A reasonable temperature
- Enough space, ventilation and lighting
- Toilets and washing facilities
- Drinking water
- Safe equipment
Lastly we would always recommend you read every word of your Lease. Your solicitor should provide you with a summary of the terms but there is no substitution for reading your lease to understand the parties obligations and rights, and the restrictions on you as tenant.
The Commercial Property Team at Burnetts would be happy to assist in preparing you to become a Tenant, along with clarifying any queries you may have. For more information contact Sarah Loan at firstname.lastname@example.org.
About the author
Sarah is an Associate Solicitor in Burnetts' Commercial Property team.