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A standard lease will contain a requirement for a tenant to comply with statutory obligations.
Often this is simply considered as applying to the running of a business at the premises. But, the statutory compliance clause can require a tenant to undertake works to the property or improve the building before handing if back to the landlord.
Works carried to buildings have to comply with legal requirements. The Building Regulations are the primary suite of documents to give guidance as to the requirements, but there may also be planning requirements.
Aside from the Building Regulations such as gas safety, electrical standards etc. On each of these there is potential for shortfalls and there is potential that a landlord will seek to ensure that these standards are attained when alterations are carried out.
Where Building Regulations apply then Building Control signoff should be sought. There is then a document to prove compliance.
Alterations will vary from dividing up office space to provide smaller offices and meeting rooms, to converting parts of a building for an alternate use.
An extreme example of an alteration would be the conversion of an upper floor from commercial use to residential use. There are a myriad of potential statutory requirements. Planning may be needed for the change of use, which may or may not be permitted in a particular area. Building Regulations would be needed, the issue of fire safety being at the forefront.
Whether alterations are legal is of huge importance to the landlord. If the work does not comply then it may be valueless to the landlord and there will be a cost associated with removal. There is scope under the clauses to seek having works put right.
There are other aspects such as the installation of new glazed shopfronts which, if not carried out in accordance with the regulations, may not comply. Approved Document K, Protection from falling, collison and impact (of the Building Regulations) considers the safe use of glazing and the standards that should be set.
There are variations where this is not an alteration and altering glazing etc would be seen as an improvement but that gets into a whole new set of arguments, also consider the fact that on the whole the building regulations aren’t a set of regulations which retrospectively improve all buildings; but look to control how buildings have changed and are used.
At the end of a lease there are three aspects to consider:
At the moment the lease ends there will often have been a Schedule of Dilapidation served requiring a variety of repairs to be carried out. These repairs will have to be carried out in accordance with the Building Regulations.
A good example of the implications of the Building Regulations would be for the replacement of a roof. If renewal is the only feasible option then it may need thermally upgrading. The Building Regulations have thresholds for building elements, if the thermal threshold is not met thenthe element would need upgrading.
There are situations where it can seem unfair for the tenant to bear the costs of upgrading the roof and this then feeds back into the considerations of making sure there are aspects such as Schedule of Condition to record the condition of a roof or elements at the outset of the lease.
A significant aspect now of Statutory Compliance is the impact that the Minimum Energy Efficiency Standards [MEES] has had on the potential liabilities. A landlord is now no longer legally allowed to let a commercial building which has an EPC rating of below E. Any commercial minded landlord (this is not considering ethics in the slightest), may well be advised and will considered themselves whether there is scope for any works that need to be made to ensure the building complies at the end of the lease for a new tenant to take occupation to indeed see how much of this can be passed onto the tenant. There are complications with regard to this even further because it may simply be a lease renewal where the tenant wishes to remain in the building but legally there has been that trigger of an end of lease and a new lease being signed.
There is probably a great deal of complications in this area especially as it is only from the 1st April 2023 that the enhanced levels and a requirements have come into play. There will be the vast majority of current tenancy at April 2023 now which don’t take into consideration these regulations. There will be a great many leases being signed after the 1st April 2023 which are still quite ignorant of the changes and that old forms which a landlord has used over many years always seen as being sufficient.
Foremost is prior to comitting to a lease, commissioning a building survey can identify problems.
A survey can aid determining if the building is suitable. A building survey should be flexible, to discuss client needs and how legal requirements may complicate matters.
Throughout the course of the lease term there may be actions required and where these are not completed a claim may result at the end of the term.
In the past with the changes of the regulations this may simply necessitate improved alarm systems to meet fire risk assessment recommendations, but overtime there is a greater complexity. Fire regulations and firestopping are at the forefront of many considerations for diladpidations.
At the end of the lease is the last opportunity a landlord has to pin on the tenant any shortfalls they believe may exist. Pre-empting claims with a plan inadvance of the lease end helps. Often clients will have Dilapidations Liability Reports completed. These can identify issues during the course of the term . What may once have been a minor repair and could have been nipped in the bud, may develop into a significant item of work, going beyond what many would consider repair, but would be necessary to comply with statutory requirements.
Statutory Regulations need to be considered when alterations are being carried out to the building, when repairs have been carried out and at the end of the lease.
The clause requirements can often be overlooked, but can be used to a Landlord’s advantage at a lease end.
If you are tenant we can advise on managing the risks posed and negotiate on your behalf. If you would like to speak with us for advice please do not hesitate to contact us.
