Whether you’re a commercial landlord or tenant, understanding your responsibilities under a lease is essential to avoid costly disputes, ensure compliance with regulations, and maintain a strong working relationship.
Most of the responsibilities of the landlord and tenant are allocated within the lease, but some things relating to the property may not specifically be addressed. So, who is responsible for what? This article explores the division of responsibilities between landlords and tenants in commercial properties, with updated insights about the impact of recent legislative and regulatory changes. You'll find practical tips to help you understand your obligations, preserve your business relationship, and ultimately your investment. By the end, you should have a clearer understanding of your current legal obligations and best practices in managing commercial lease agreements.
And if you are in any doubt, our friendly team of commercial property solicitors are on hand to help. We provide clear, pragmatic, and tailored advice to help landlords and tenants agree on fair and practical working terms.
Contents:
Recent Changes
In recent years, several legislative and regulatory updates have reshaped the landscape for commercial leases in the UK. Landlords and tenants alike must be aware of these developments to ensure ongoing compliance and mitigate risk.
Law Commission Review
The Law Commission has been reviewing the Landlord and Tenant Act 1954 (which governs commercial leases) with the aim that it reflects modern practices. Key proposals include simplifying the legal framework around renewals of business tenancies to reduce disputes and costs. This could involve potentially widening the types of leases that are excluded from security of tenure and creating a default position of opting in (instead of the current opt-out). While reforms are still under discussion, it seems a more flexible leasing environment is on the agenda. With the potential softening of the strict rules and regime imposed by the Act, this may mean customised, well-drafted leases will become even more important - with a greater emphasis on negotiation. Parties may need to be more proactive in clearly defining obligations at the outset, especially around renewals.
Energy Efficiency Regulations
As part of the government’s push to achieve ‘net-zero’, stricter energy performance rules now apply:
- Since April 1, 2023, it has been unlawful to continue leasing commercial properties with an EPC (Energy Performance Certificate) rating below E, unless a valid exemption applies.
- This is expected to tighten further, possibly raising the minimum standard to C or above by 2027.
While the primary compliance duty is on landlords to ensure their property meets the standard, the tenants obligations under the lease are also impacted. In reality, the landlord needs the help of the tenant to ensure it can meet its obligations – for eg, not to do anything (including carry out any alterations or making reinstatements) that would reduce the energy efficiency of the building. For landlords, they need to reserve rights to carry out EPC assessments, and scope to carry out any works to improve the building’s environmental performance (the costs of which they often seek to recover through service charges). In fact, there have been an increasing number of ‘green leases’, where the landlord and tenant both cooperate in a joint sustainability effort and share the costs. These leases contain positive obligations to do things like share data on utilities consumption, manage waste, and implement energy saving measures.
Renters' Rights Bill 2024
Though aimed primarily at residential tenants, the Renters’ Rights Bill 2024 reflects a broader shift in UK property law toward increased tenant protections. While not directly applicable to commercial leases, it signals:
- A legislative appetite for greater transparency and accountability from landlords.
- A growing focus on tenant security, which may influence future updates to commercial tenancy laws, particularly around unfair terms or early termination clauses.
Together, these changes highlight the importance of reviewing your lease terms in light of new statutory obligations—and proactively seeking legal advice where needed.
Maintenance and repair
This should be clear from the lease agreement. Usually, the tenant is responsible for all maintenance and repairs of the property, which can include internal, external and structural parts. The definition of property should clarify what is considered to be part of the property. If the tenant is leasing an internal area only, such as an office in a building, then they must usually repair their internal space and pay a ‘service charge’, which is a proportion of the landlord’s costs, for looking after the common areas and external areas.
For some short-term leases, such as of serviced offices, a tenant may only need to decorate, with other maintenance and repairs being the landlord’s responsibility.
A tenant may be able to negotiate the lease to limit the liability by reference to a photographic schedule of condition. This would evidence the condition at the start of the lease, and the tenant would not be required to return the property in any better condition at the end of the term.
When a tenant vacates the property, they may have to pay for certain repairs or return the property to the state it was in when first rented. The repairs are called ‘dilapidations’. This can include requiring you to reinstate the premises to its original condition if you have made alterations.
Any responsibility that isn’t mentioned in the lease will usually be the tenant’s responsibility. We discuss this subject in more detail in our guide, 'Is a tenant responsible for repairs in a commercial lease?'.
Insurance
The most common position is that the landlord would insure the building (including the tenant's premises) in the landlord's name to the reinstatement value, together with loss of rent for a specified period (typically three years) and will recover the cost, or an appropriate proportion, from the tenant. The tenant should be obliged to pay these sums on demand. The costs typically include the premium, any excess, VAT and fees and other expenses.
The tenant will be prohibited from doing anything that may invalidate the buildings insurance, preventing a tenant from double-insuring the property. The lease would not usually prevent a tenant from taking out their own insurance for other matters such as contents, public liability and business interruption.
If any damage to the property is covered by the insurance, the landlord will be required to claim under the insurance and apply the insurance monies received in reinstatement of the property. The tenant may have negotiated with the landlord that if the demised premises cannot be reinstated, then the tenant (or perhaps either party) can terminate the lease.
In addition, more recent leases will also cover how damage is to be dealt with if caused by an uninsured risk, where insurance is not generally available in the open market or not on reasonable terms (for example, flooding). A tenant would want to resist liability in those circumstances, and increasingly, landlords are willing to take some of that risk.
Depending on the circumstances, a landlord may be happy for the tenant to insure the property.
Statutory compliance
Legislation imposes obligations on property owners, occupiers or both. Some of these statutes will also:
- confirm which party has the primary obligation to comply with a requirement
- give the court the power to apportion the cost of compliance between those having an interest in the property
- state that the court may have regard to the terms of the lease when deciding what would be a just and equitable cost apportionment between the landlord and tenant.
There is usually a clause in the lease which aims to shift responsibility for all statutory compliance to the tenant, where possible. This includes obligations relating to the following:
1. Health and safety risk assessment
The tenant must carry out a health and safety risk assessment in the workplace and take action to remove any hazards. For multi-let buildings, the landlord will normally keep the health and safety file.
2. Fire risk assessment and safety
A fire risk assessment will identify what you need to do to prevent fire and keep people safe. The position appears to be:
- For single-let properties on a full repairing and insuring lease, the responsible person will be the tenant to undertake regular risk assessments
- For multi-let buildings, each tenant may be the responsible person for their own unit and the landlord will be responsible for any retained parts, vacant units and communal areas
If the tenant is required to comply with the requirements and recommendations of insurers, it should ensure that its liability is dependent on seeing a copy of the insurance policy and written confirmation of any additional requirements and recommendations.
3. Safety of electrical equipment
As the landlord, you may be responsible for the electrical safety of the property. It is recommended that:
- any electrical product, fixture or fitting is safe when tenants move in and they are regularly maintained
- electrical products are tested every five years by a registered electrician and at the end of every lease.
There is a requirement to inspect and test all types of electrical equipment in all work situations. However, the duty is placed on an employer and not on the landlord or tenant of commercial premises. If the tenant is an employer, the duty to carry out portable appliance testing will rest with the employer.
The lease may require the tenant to be responsible for complying with all laws relating to the use of all machinery and equipment at the property which would place the liability for carrying out these tests on the tenant.
4. Gas safety
The tenant usually must maintain equipment according to the manufacturer’s instructions, which could mean an annual inspection by a registered gas safety engineer to make sure appliances and pipework are safe. Landlords are usually responsible for the safety of all electrical and gas installations in communal areas.
The relevant party must also ensure that they keep records of all safety checks that are made and that any work to any gas fitting is carried out by an approved Gas Safe registered engineer. If the party responsible for gas safety under the terms of the lease fails to adhere to these regulations, they could be faced with a large fine or imprisonment.
5. Asbestos
There are statutory obligations on the "dutyholder" to:
- determine whether asbestos is present in a building, or is likely to be present
- manage any asbestos that is or is likely to be present. This involves assessing the risk and putting action plans and systems in place for managing the risk.
A landlord will attempt to pass on the obligations to a tenant, but where a landlord retains some obligation to maintain or repair (for example, the structure or common areas) or has the power to carry out maintenance work if the tenant defaults, and to forfeit the lease, they will remain a dutyholder. The landlord will oblige the tenant to cover the cost of managing asbestos in the other parts of the building, together with other tenants, through a service charge.
Where there is more than one dutyholder, the relative contributions to be made by each in complying with the statutory duties are determined by the "nature and extent of the maintenance and repair obligations" owed by each dutyholder.
The landlord would have to step in to carry out work in the event of the tenant’s default. The landlord will become the primary dutyholder on a forfeiture or surrender, and on the expiry of the term of the lease.
The above list is not exhaustive. Leases often also contain a tenant's covenant to indemnify the landlord, for breach of covenant and for the tenant's acts or omissions.
Energy Performance Certificates
Prior to granting a lease of most commercial properties, the landlord must provide an energy performance certificate (EPC) to the tenant. This provides information regarding the energy rating for a building. Generally, if there have been no changes to a building, then an EPC is valid for 10 years
Sometimes a new certificate may be required as a consequence of the tenant undertaking alteration works at the property or because it is disposing of its interest in the lease, and the obligation would then fall on the tenant, usually in accordance with strict conditions in the lease.
As mentioned above, it is now unlawful to grant, renew, or even continue to let properties that are substandard. Landlords must improve the environmental performance of their building to avoid fines, and current leases put obligations on tenants not to harm ratings.
What other responsibilities may a tenant have as an employer?
As an employer, a tenant will have a general duty to ensure that they provide a healthy and safe working environment. This will include ensuring that they provide:
- a reasonable working temperature
- enough space ventilation and lighting
- toilets, washing facilities and drinking water
- safe equipment
- reasonable adjustments to accommodate disabled employees and customers.
Summary
Ultimately, the lease is the starting point for reviewing specific responsibilities of the parties and the extent of those responsibilities, but relevant legislation and the evolving regulatory landscape also come into play. As highlighted in this article, the division of responsibilities often depends on the type of lease and building/premises let (single or multi-use, internal area only, etc). Repairs and maintenance often heavily fall on the tenant, while landlords typically insure the building. Each party also has their own responsibilities about health and safety in their capacity as property owner, occupier, or employer. While there are standard practices and common positions, what’s on paper will also reflect the commercial deal negotiated and agreed between the parties. It is not uncommon for landlords to try to pass some responsibility onto tenants, or recover their costs (for eg for building EPC improvements) through service charges.
Given the legal and practical complexities involved, instructing an experienced commercial property solicitor is a smart step.. Here at Harper James, we provide invaluable guidance tailored to your lease, helping you:
- Ensure compliance with evolving legal standards.
- Negotiate fair and practical lease terms.
- Minimise the risk of disputes through clear contractual language.
- Understand your rights and responsibilities under both the lease and the law.
With our expert guidance, both parties can reduce the risk of disputes and maintain a constructive and legally sound commercial relationship. Get in touch today.
