How do I make sure my commercial rental property is properly maintained?

Regular Inspections: Conduct routine inspections of the property to identify any maintenance issues or potential problems. Check for leaks, cracks, signs of wear and tear, malfunctioning equipment, and safety hazards. Address these issues promptly to prevent further damage.

Without proper maintenance any commercial property will gradually fall into disrepair. It will cost far more to repair a neglected building – a stitch in time. Without a proper maintenance plan and regular attention the building will decay and it will cost far more in the long run.

Business tenancies tend to be long: 5, 10 or 15 plus years, so it’s important that commercial landlords have some control over repairs and maintenance.

Good commercial tenants will want to keep their property in good repair because a run-down building will have an adverse effect on their business, especially when their customers are visiting the building.

But being tenants and not owners of the building there is often a reluctance to spend money on it: that’s why the commercial landlord must have a strategy for making sure necessary repairs are carried out.

The commercial lease

The key to this process is the lease, and the maintenance clauses it contains. Unless the lease is a short one, under six months, the ideal for a commercial landlord is to let the building on a full repairing and insuring (FRI) lease.

This is the traditional institutional lease where the owner has a clear unencumbered return on the investment – the tenant pays for everything, including insurance, safety checks, repairs and reinstatement at the end of the lease term – see dilapidations.

The lease should include a Schedule of Condition which records in detail the condition of the property at the commencement of the lease term, usually drawn up by an independent party – a chartered surveyor. The schedule, whether provided by the landlord or the tenant, is then agreed at the outset by both parties. It’s a reference point for reinstatement when it comes to drawing up a Schedule of Dilapidations.

Self-contained buildings

Where the tenancy is for a self-contained building – that is where the tenant occupies the whole building – maintenance responsibilities are somewhat simplified. Usually, the landlord supplies the building in good tenantable repair, as per the Schedule of Condition, meeting all the applicable regulations such as planning use, electrical, gas and fire safety.

From then the responsibility – if the lease is properly drawn up – lies with the tenant to maintain the building and comply with all the necessary regulations, and return the building in a well-maintained tenantable state. If not, the landlord has recourse to the dilapidation’s procedure.

Multi-occupied buildings

A multi-occupied building presents more of a challenge and more work for the landlord. As no one tenant can take responsibility for the whole building the landlord or his managing agent must coordinate and arrange for the necessary repairs using a maintenance schedule. For example, annual gas checks, 5 yearly electrical system checks, annual fire alarm and fire equipment checks and servicing, painting every 7 years etc.

Generally, the tenant will be responsible for their own internal repairs and decorating, workplace safety etc, while the landlord will be responsible for the external structure – roof, walls, windows and doors – and the common areas.

The Responsible Person

Fire safety is the big issue here. The law places responsibility for fire safety in the building as well as the safety of occupants, workers and visitors in the hands of “The Responsible Person”. In practice, in this type of multi-occupied building, this responsibility is usually shared between landlord and tenant along the lines outlined above – the tenant (employer) in relation to a workplace and internals, and the landlord / agent for externals, safety checks and common areas.

Either the person who has control of the premises (managing agent) or the owner along with the tenant will be responsible where the premises is not a workplace, such as an unmanned storage warehouse.

In addition to the gas safety and electrical safety checks, the Regulatory Reform (Fire Safety) Order 2005 imposes various duties on the “responsible person” with regards to fire safety in commercial properties.

Duties under this Order include, but are not limited to, arranging general fire precautions to ensure that certain people are safe in the event of a fire, carrying out a fire risk assessment and keeping this under review.

It’s a good idea to have an initial risk assessment carried out by a fire consultant, a specialist who will draw up a detailed scheme. This can either be repeated every 12 months by the specialist, or simply reviewed by the landlord or agent.

Regular inspections should be carried out and documented to ensure that in the whole premises, fire alarms are served and tested weekly, all fire safety equipment is easily accessible and serviced annually, and that fire doors, emergency escape routes and exits are properly maintained and kept in working order.

A “responsible person” found guilty of non-compliance with the Order will be liable to a fine and, in the most serious cases it could mean imprisonment if proceedings are brought in the Crown Court.

General Commercial Property Maintenance

Modern buildings have systems which need regular maintenance. HVAC Systems, heating, ventilation, and air conditioning (HVAC) systems are all essential for comfortable occupation and efficiency. Schedule regular maintenance for HVAC units, including filter replacement, cleaning ducts, and inspecting for any issues. This will ensure optimal energy efficiency and reduce utility costs.

Service charges and disputes

When a landlord sticks to a regular maintenance plan to keep the property in a good state of repair as per the schedule of condition, and without undertaking unnecessary work, most tenants will appreciate this as it enhances their business.

However, experience shows that some tenants, especially if their business is struggling, will resent having to pay out money for repairs, maintenance and groundworks on top of their annual building insurance charges. Usually, the landlord will finance the repairs and maintenance and apportion the costs between the tenants in the building according to a formula set-out on the lease – usually based on occupied floor area.

When disputes arise, often because the tenant is arguing about the necessity of the work or that there is excessive cost of repairs, it may be necessary to follow up with court action. Landlords cannot afford to allow one tenant to avoid paying service charges while others are paying in full.

In some cases it may be possible to resolve disputes without resorting to the courts through a process of independent mediation, but if a stalemate is reached it may be necessary for the parties to agree to an independent assessment of the work by a qualified third party, i.e., a chartered surveyor.

Schedule inspections, safety checks and maintenance

Set a schedule for weekly, monthly, and annual tasks using a checklist, and make sure that these are carried out with any work identified as needed to be carried out without delay. don’t put off minor repairs or safety issues as they can turn into major issues over time.

Don’t forget externals such as drives, paths and outbuildings which can represent safety issues for which the responsible person is responsible for. Roads, potholes, pavements and pavers out of place can all cause safety hazards for vehicles and people coming to the property.

Prevent Pest Infestations

There’s another issue that regular inspections should identify and that’s pest infestations that can easily get out of control. Just like neglected maintenance issues, the longer this goes on, the worse it can get. With a serious outbreak you may need a pest control specialist to deal with the problem.

Conclusions

There’s quite a bit of work involved in keeping on top of tenancies in a multi-occupied building, making sure the building is kept in tip top condition and ensuring that you are meeting the critical safety regulations.

There’s a lot to schedule in, so you might consider using a professional managing agent to take on some of these responsibilities. This will cost money but it has the advantage of having an independent person to decide what’s required, and that may be more acceptable to your tenants.

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