Let commercial property that has been sat for years without any dealings are often under ‘old leases’. An ‘old lease’ is a lease that was executed prior to 1 January 1996. The Landlord and Tenant (Covenants) Act 1995 split leases in to either old (completed before 1 January 1996) and new leases (those completed on after that date apart from some exceptions). On assignment, tenants under a new lease are released from their obligations. Tenants under an old lease remain liable for the remainder of the term.
Modern legislative updates are not expressly dealt with under old leases. When a tenant applies to assign an old lease, this is the perfect time to ensure the commercial property complies with current regulations and utilise the opportunity to deal with any other problems you may be encountering. Examples of these are set out below.
Fire Risk Assessment (FRA)
You must have an up-to-date FRA. This may seem obvious, but it can easily slip through the net. It can be either a tenant or landlord’s responsibility to seek and maintain an FRA. The FRA is often a tenant’s responsibility but can develop into a matter of negotiation due to the avoidance of costs. Either way, the FRA must be sought by the ‘responsible person’. Not knowing who this person is can unfortunately result in the requirement being overlooked. The existence of an FRA is ultimately a life-or-death matter and its absence can cause you to be imprisoned or fined. It’s advisable to make producing an up-to-date FRA a condition of assignment.
The regulations define the person responsible for this as the ‘dutyholder’. The dutyholder is the person responsible for repair and maintenance under the lease. It’s likely to be the tenant but the position needs to be reviewed and defined to remove any potential liability. Again, this directly relates to the safety of those who enter the property and ultimately a duty of care owed to them. Failure to hold an asbestos survey can result in fine or imprisonment. Producing this can be a condition of assignment.
Ultimate liability for commissioning an EPC in an ongoing lease is unclear. It can fall to the landlord or tenant. The regulations state that an EPC must be given to any prospective tenant or buyer at the earliest opportunity. There are some limited exceptions. An assignment does not involve the property being re-let but an incoming tenant is likely to require sight of this. Failure to hold an EPC can result in a fine.
If your tenant is in breach of any obligations of the lease, this is a perfect time to ensure compliance. You could make the payment of any arrears or correction of another breach a condition of the assignment.
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*This is not legal advice; it is intended to provide information of general interest about current legal issues.