As a business owner, your premises are vital to your success. It’s where your staff work, products are produced, and where customers come to receive your services. Any factors that affect the commercial property can therefore have knock on effects on those that are currently using the building. Issues like vandalism, power outages, and adverse weather conditions can all be prepared for and mitigated, but changes in legal position are often harder to predict.
In this blog, we’ll be discussing if a landlord can sell a commercial property during a lease and if so, how this affects the tenants.
The responsibilities of commercial landlords
A commercial lease is often far longer than leases for residential properties, averaging around 70-100 years. During this time, commercial landlords, also known as freeholders, have a number of obligations in relation to the building and the tenants. These include:
Repairs and maintenance
Typically, a commercial landlord is responsible for any structural work that has to be done during the course of a lease. This includes flooring, foundations, exterior walls, roofing, windows and doorways. Although special considerations can be made in this area, leading to variations in lease agreements.
This is an essential aspect of any lease, commercial or otherwise. It provides financial security for the landlord and any occupants of their property. There is the option for commercial landlords to pass on any insurance arrangement costs in the form of insurance rent.
Health & safety
Landlords must ensure the properties they lease are safe to occupy and use for commercial purposes. These requirements will therefore vary depending on the nature of the tenant and the property itself. Common duties include complying with gas and electrical equipment regulations and maintaining fixtures and fittings.
As of April 2023, commercial landlords were given an additional maintenance responsibility. This states that the property must consistently produce a performance rating of at least E when submitted for the Energy Performance Certificate. If this isn’t the case, the property cannot be leased.
Can a commercial lease be sold while it’s in progress?
In short, a commercial lease does not prevent the sale of a property by its landlord. When this happens, tenants will receive a written notice informing them that the sale has reached completion. The landlord does not have to tell tenants about any legal proceedings until this stage has been reached. This notice will contain:
- The buyer’s name and contact details.
- The buyer’s bank details and any payment terms.
This is the stage when it is best to seek expert advice from commercial conveyancing solicitors.
What to do if your lease is sold
The first thing to note is that if the building you occupy is sold, your lease is safe. Its contractual terminology states the agreement is valid until the lease ends. The landlord has merely sold their stake in the property, which includes any ongoing commercial leases. If your lease is a protected lease, you have the right to renew the tenancy with a new lease with a new set of terms. It should be noted that the new landlord can choose to deny this request. For instance, if they want to demolish the building or conduct significant redevelopments.
A landlord’s obligations can change when they sell a commercial property. For leases begun on or after 1st January 1996, landlords will typically share responsibilities with the new buyer. Obligations will pass fully to the new freeholder if the existing landlord:
- Reaches an agreement that waives their responsibilities.
- Has negotiated their release.
- The lease includes an exclusion of liability clause.
This is not the case if the lease was granted before 1966. Instead, landlords that sell during the course of these leases still have to fulfil their obligations until the lease expires. This cannot be circumvented through the use of an exclusion clause.
Commercial conveyancing solicitors Whitley Bay
At Toomey Legal, our goal is to give clients a personalised service that offers the knowledge and support needed to buy and sell commercial property in the North East. We have over 30 years of experience in the field providing services for both landlords and tenants. As such, if you’re looking for online conveyancing Tyneside, don’t hesitate to contact us via our website, over the phone, or simply by visiting us in person. We start proceedings with a free initial meeting to get a full understanding of your situation and establish the rate of our fixed conveyancing fees.