Being a landlord is a business. And, like all business activities, while much of what landlords and tenants may agree between them is the product of negotiation and market dynamics, the law also plays a key part.
The law that governs landlord and tenant relationships is well established.
In this guide, we take a look, in collaboration with WJM’s Gillian Cowie, at what Scots Law says about the terms commercial landlords and their tenants may agree.
If you're a landlord providing premises to someone intending to run their business from that spot, or you're a business tenant about to agree terms with a landlord for those purposes, you should be aware of these laws.
Commercial leases are a significant commitment that can have a very material impact on a business and its prospects of success. If either a landlord or tenant becomes unhappy with the terms they've agreed, wants to end them or wants to change them, what's gone into the terms of that agreement may suddenly become critically important and potentially very contentious.
So, here's what you need to know upfront...
6 key terms you should know as a commercial landlord
The UK's property laws applicable to business landlords and tenants are peppered with terms and phrases that have very defined legal meaning.
Take a quick look at our infographic below for a fast summary of some of the main ones you'll come across in this guide.
Landlord's permitted reasons for not agreeing to renew a lease
In Scots Law, there's no equivalent to the Landlord and Tenant Act 1954. The position is governed by common law rather than statute.
At the end of a commercial lease in Scotland, there is no right to renew.
A lease will, however, automatically renew for a further period of 12 months on the same terms and conditions unless either the landlord or the tenant has served a notice to quit not less than 40 days prior to the contractual expiry date.
Landlord's obligations to business tenants
In Scotland, leases are generally in full repairing and insuring terms meaning the landlord seeks to transfer on to the tenants their common law obligations to maintain, repair and keep the premises wind and watertight.
Health and safety responsibilities
In most cases, the landlord shifts/shares the responsibility for health and safety obligations to/with their tenant. However – if there are communal areas, then there are still a number of obligations for which a commercial landlord will remain responsible.
The health and safety requirements on landlords essentially mean that they must keep communal areas safe and free from health hazards, often charging the cost of doing so back to the tenant via a service charge.
When it comes to things like evacuation procedures in the event of a fire or serious incident, the business tenant is typically responsible for devising and operating these.
Ensuring that any communal fire exits and escapes are structurally fit for purpose will almost always fall to the landlord, and the supply of fire safety equipment, including smoke alarms and carbon monoxide detectors in communal areas may also be included in those obligations. Again, costs can usually be re-charged to tenants via a service charge.
Keeping exits clear and maintaining the condition of the property will generally fall to the business tenant. But these are all considerations that must be very clearly defined in the terms of the business lease.
Maintenance and repair
Generally, commercial leases are let on full repairing terms, meaning that the tenant will be responsible for all repairs to the property. However, if only part of a building is being let, careful consideration will need to be given to who maintains what, to ensure that no items of repair become neither the landlord’s nor the tenants responsibility.
The tenant will be the duty holder for the Asbestos Regulations. A sensible tenant will ask his landlords for a copy of any asbestos survey before taking a lease to ensure that any asbestos risks are properly managed. Asbestos doesn't always need to be removed, but not managing the risks properly can lead to fines of up to £20,000 and two years in prison.
When it comes to utility services, like water, gas and electricity, the tenant will usually be responsible for ensuring that the property is fit for purpose and connected to these essential facilities, unless the property is part of a larger building, like an office block.
The tenant is also likely to be responsible, in most cases, for the regular maintenance and inspection of these service arrangements by qualified engineers and the safe storage and display of the relevant safety certification. Again, a sensible tenant will request safety certificates from their landlord before signing a lease.
And if the tenant modifies the supply arrangements, these will fall within their responsibility. The lease terms should be clear on what the tenant is permitted to do and where any consent from the landlord is required before any additional modifications might be permitted.
Fixtures and fittings
Fixtures and fittings are the more cosmetic features of a property and they're typically non-structural and often non-permanent.
There's no formal legal definition of fixtures and fittings, but as a general rule of practice, 'fixtures' are items that tend to be attached or bolted to walls, ceilings or floors (like wall lights, light switches, doorbells, radiators, sinks, curtain rods, cabinets and meters). 'Fittings' are generally free-standing, like desks, work benches, racking and bins.
Any fixtures will generally belong to the landlord as part of the property, but fall to be maintained by the tenant. Fittings that the tenant's installed in, or placed on the property need to be safe to use. This includes correct installation and, in the case of some electrical equipment, a safety certificate.
If the tenant installs any fixtures and fittings themselves, then it will be their responsibility to maintain those.
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