April 2020

We take a brief look at the types of ‘certificates’ a commercial landlord or an assigning/subletting tenant) must usually supply to the tenant before granting or assigning or subletting a lease of commercial premises.

Before marketing your leasehold commercial property, or at least before a tenant is found, it can save a considerable amount of time and cost if you give some advance thought about the documents that will normally have to be produced as part of the new Tenant’s ‘due diligence’ exercise before the Tenant commits to the lease, particularly if you desire a speedy completion.

Commercial property solicitors will be in a special type of legal heaven if the landlord (or its managing agent) is able to supply the information at the outset.

Preparing to let your commercial building?

There are of course potentially many other documents that may be needed for particular properties, such as liquor licences for licensed premises, but in this article we consider the most common types of ‘certificates’ needed prior to the granting, assigning or subletting of any leasehold commercial building, the purpose of each certification and the reasons why tenants will require the information.

Planning permission and building regulations

Unless the tenant is to obtain a new permission to cover its use or works, It is customary practice for evidence of the existing authorised use and development of the premises comprised in the lease to be required, normally in the form of the planning permission (which may have conditions attached, which may also require evidence of compliance) or a certificate of lawful use or development issued by the local planning authority, and any relevant building regulation approvals and associated completion certificates.  Under section 1 of the Building Act 1984, any work which involves the design and construction of buildings (which includes extensions and alterations to an existing building), the demolition of buildings or services, fittings and equipment provided in or in connection with buildings can be subject to building regulations, particularly where such works are connected with the following objectives: 

  • Securing the health, safety, welfare and convenience of persons in or about buildings and of others who may be affected by buildings or matters connected with buildings
  • Furthering the conservation of fuel and power
  • Preventing waste, undue consumption, misuse or contamination of water
  • Furthering the protection or enhancement of the environment
  • Facilitating sustainable development
  • Furthering the prevention or detection of crime

Work of a structural nature (such as the removal of a load bearing wall as opposed to a non load bearing partition, repairs to or replacement of a roof, and any building extensions generally require building regulations approval, as well as works such as replacement windows and any gas and electrical installations or their replacement. If the building is a listed building or within the curtilage of a listed building, listed building consent may also additionally be required for any previous works or change(s) of use.

Asbestos

Many buildings built before 2000 will contain some asbestos since its use was not completely banned until 1999. People who have either obligations under contracts or tenancies to maintain or repair non-domestic property, or have control over or access to non-domestic property are subject to Control of Asbestos Regulations 2012 in relation to statutory duties in respect of asbestos control and management in commercial premises and this will normally be dealt with by way of an Asbestos report carried out by an appropriately qualified surveyor.

Normally the dutyholder will be the person in control of the premises, but the dutyholder can be the freehold owner/landlord/tenant and sometimes the managing agents, or more than one of these can be duty holders at the same time, and therefore a prudent landlord should obtain a copy from a previous tenant and obtain appropriate updating information if necessary.

Many landlords do not always realise that they have responsibilities for asbestos management where a property has been let for a number of years. However, where a freehold owner leases the whole of a property, the freeholder may retain some obligation to maintain or repair the main structure, and even if there is no express repairing obligations on the landowner, there will probably be some right for the owner to carry out maintenance work if the tenant defaults, and to forfeit the lease meaning that some responsibility is retained even if primary responsibility rests with the tenant.

It is also commonplace for many commercial leases to include an indemnity by the tenant for any losses or expenses in relation to compliance with the regulations, but the freeholder remains a statutory dutyholder alongside the tenant, even while the lease is in place, and when it resumes possession.  Moreover an indemnity given by a tenant is only of value while the tenant has the resources to provide the indemnity.

Where a tenant underlets the whole of its property, it will still have liabilities under its own lease to maintain or repair. It may be that the primary responsibility is passed over to the occupying subtenant, but the tenant will need to recognise that it will remain a dutyholder alongside the occupier and possibly the landlord.

What are the dutyholders responsibilities in relation to asbestos?

In summary the duties are to:

  • Take "such steps as are reasonable in the circumstances"
  • Consider the condition of any asbestos which is, or has been assumed to be, in the premises
  • Carry out a suitable and sufficient assessment of premises to determine the risk of the presence of asbestos
  • Take account of building plans, other relevant information and the age of the premises; and
  • Ensure that an inspection is made of those parts of the premises which are "reasonably accessible"
  • Inspect the building, both internally and externally, and examine:
  • Construction and refurbishment specifications
  • Specifications for plant and installations
  • Generally manage the risk of asbestos present at the premises, which can include its removal

It is a criminal offence for a duty holder not to manage asbestos in line with the requirements of the regulations.  Before taking a lease and as part of due diligence enquiries a tenant should always ensure that the landlord or outgoing tenant produces a satisfactory asbestos report. After the lease is granted or assigned, any asbestos in the leased premises will become the Tenant’s responsibility.

Fire safety risk assessment

In terms of fire safety in commercial premises, a duty to carry out a fire risk assessment is imposed by the Regulatory Reform (Fire Safety) Order 2005. This duty which falls on the “responsible person”. That person is

  • In the first instance, employers, if the premises are a workplace under their control to any extent.
  • In relation to any premises where there is no employer, the person who has control of the premises (whether the occupier or owner of the premises or not) for the purpose of a trade, business or undertaking (whether or not for profit).

Otherwise the obligation falls on the owner, for example, in the case of a newly constructed building which has yet to be occupied.

The Order requires fire precautions to be put in place “where necessary” and to the extent that is reasonable and practicable in the circumstances of the case.  The fire risk assessment must establish the current level of risk from fire and the fact that those in the buildings can be evacuated safely. The assessment will identify what needs to be done to significantly reduce the risk of harm/injury and property damage

Therefore a landlord of empty business premises should normally produce a fire risk assessment report as part of due diligence enquiries prior to the grant of a new lease. However when a new tenant takes a lease the fire risk assessment should be always be reviewed upon taking up occupation and whenever the circumstances change.

Electricity and Gas installations

Generally speaking, unless otherwise agreed as part of the Heads of Terms during negotiations, there is no onus on a commercial property landlord or assigning tenant to provide electricity and gas safety certificates to the new Tenant before granting a commercial lease of commercial premises.

Most commercial leases of whole premises where the installations serve the premises exclusively will pass the responsibility for these installations to the tenant under the terms of the lease.

If the installations form part of the ‘common parts’ of a building then the landlord will normally be responsible for those parts and usually recovers its costs via a service charge payable by the tenants.

The requirement for a ‘gas safety check’ under Gas Safety (Installation and Use) Regulations 1998 only relates only to residential property.

While it is recommended that electrical testing should be carried out every five years or on change of tenants, there is no legal obligation on the part of a commercial landlord to do so prior to granting a lease.

New tenants should consider requesting recent inspection certificates confirming the condition of such installations as part of the heads of terms during negotiations, or alternatively arrange for appropriately qualified professional firms to carry out inspections and surveys and to provide a report before taking the lease.

Energy Performances Certificates or ‘EPC’

It is a legal requirement for a landlord or freeholder to have an EPC

  • To market the premises
  • To rent out or sell the premises
  • When a building under construction is finished
  • When there are changes to the number of parts used for separate occupation and these changes involve providing or extending fixed heating, air conditioning or mechanical ventilation systems

An EPC must also be displayed by fixing it to the commercial building if all these apply:

  • The total useful floor area is over 500 square metres
  • The building is frequently visited by the public
  • An EPC has already been produced for the building’s sale, rental or construction.

However an EPC is not required (i.e an exemption applies) where it can be demonstrated that the building is any of these:

  • Listed or officially protected and the minimum energy performance requirements would unacceptably alter it
  • A temporary building only going to be used for 2 years or less
  • Used as a place of worship or for other religious activities
  • An industrial site, workshop or non-residential agricultural building that doesn’t use much energy
  • A detached building with a total floor space under 50 square metres
  • Due to be demolished by the seller or landlord and they have all the relevant planning and conservation consents

A building is also exempt if all of the following are true:

  • It is due to be sold or rented out with vacant possession
  • It is suitable for demolition and the site could be redeveloped
  • The buyer or tenant has applied for planning permission to demolish

EPCs are normally valid for 10 years from date of issue.

All commercial premises occupiers should also remember that, whatever the lease says, they will also have health and safety duties and responsibilities to their employees working in the premises, and for visitors to the premises.

If you are considering letting out a commercial property, assigning your lease or taking on a new lease as a tenant and require further information please contact commprop@prettys.co.uk.