Commercial Property

For many businesses, it isn’t always feasible to buy premises outright and as a result, commercial letting has become a common option for businesses to choose. When renting out a commercial property, businesses are given the opportunity to negotiate terms and find a property that best suits their needs and expectations – as a commercial landlord, this makes for an interesting and often competitive market.

If you own a commercial property that you’re looking to rent out to businesses, you might be wondering how to get started. From insurance to protect you and your property, to the responsibilities you and your tenants hold, here’s what you need to know about renting out your commercial property. 

Becoming a Commercial Landlord

When you own a commercial property, whether that’s a shop, office, kitchen or other premises, renting it out to businesses can be a great way to make back the money spent on the property and often, much more. If you don’t need the property for your own business, for example, renting out to an alternative business using a commercial lease can provide you with a steady source of income for as long as their lease continues. Being a commercial landlord, however, isn’t as simple as just accepting money each month – there are a number of things you need to consider, including your responsibilities as a landlord, what counts as a commercial property and your involvement and business relationship with the tenants. 

Generally speaking, a commercial property is any property that is clearly designed for business use and not residential use. As mentioned before, this can include shops, offices, and commercial kitchens. Beyond simply the nature of the building, you also need to be aware of the regulations required for each individual space. From health and safety to maintaining the gas and electricity safety to having the right insurance policies to ensure you and your tenants are protected, the responsibilities you hold are important to understand so you can tackle them appropriately. 

What Insurance Policies Do You Need?

The right insurance policy will offer financial protection not only for the property itself but for you and your assets. When things go wrong, whether it’s an accident, structural damage, injury or public illness, having insurance in place will ensure that you are covered financially for any cost of repairs, compensation pay-outs, legal fees and more. Commercial Landlord Insurance covers all of your basis, offering comprehensive cover, including: 

  • Buildings – This covers the cost of repairs when damage occurs to the property’s structure, both accidental and malicious in nature. Environmental damage is also included in most policies.
  • Rent Guarantee – This will provide you with financial protection if your tenants are temporarily unable to pay their rent or are in arrears, offering the equivalent of up to six months of rent payments.
  • Contents – If you are providing furniture or furnishings in the commercial property, contents insurance is a must. From kitchen equipment to desks and chairs, contents insurance provides financial cover for any repairs needed following damage, as well as replacement costs if something is stolen.
  • Public Liability – This covers if the business or a member of the public is harmed by the property as a result of an accident or negligence. It will protect you financially in the case of claims, compensation and legal fees.
  • Malicious Damage – This cover provides financial aid for any repairs or replacements following malicious damage made to your property by a commercial tenant, one of their customers or a member of the public.
  • Legal Expenses – This will cover any legal costs that you have incurred as a result of claims made by you or claims made against you connected to the property.

Landlord Responsibilities

Just as you will with a residential property, landlords of commercial property have a number of responsibilities that they need to follow in order to safely and legally rent out their commercial buildings. These responsibilities range from health and safety assessments to maintaining fire safety and asbestos checks throughout the tenants’ entire lease. When becoming a commercial landlord, you have a responsibility for: 

  • Health and Safety – most health and safety requirements will lie with the tenant, however, you need to maintain a few things as a landlord to aid this. This includes maintaining communal areas (e.g. kitchens shared by multiple tenants), regular gas safety checks and more.
  • Fixtures and Fittings – Commercial landlords are responsible for any fixtures and fittings provided with the property, such as lighting, heating and other electrical systems provided before the tenant moved in. This includes ensuring that each system runs safely and efficiently and that no risk is left unchecked or unattended.
  • Gas and Electricity – The responsibility for gas and electricity maintenance will ultimately depend on the agreements of the lease agreed upon. The requirements for safe gas and electricity operation can be the responsibility of either party, however, landlords are typically responsible for providing a safe electrical system within the property, including that the installation must be safe at the beginning of the tenancy, and maintained throughout the entire lease. 
  • Maintenance and Repair – This is another key point that can be laid out in the lease when bringing in new tenants – the general maintenance and repair of the property throughout the lease could be the responsibility of either party. Typically, however, landlords will be responsible for structural repairs such as foundations, flooring and roofing, while tenants will be responsible for internal, non-structural repairs such as air conditioning, plumbing etc.
  • Asbestos – This is another point that can be decided between the landlord and tenant in the lease agreement. Whoever is deemed responsible will need to maintain regular asbestos checks following the Health and Safety Executive’s guidelines.
  • Fire Safety – While everyday fire safety will be the responsibility of the tenant, you should provide equipment such as fire blankets and extinguishers, as well as smoke alarms, to ensure fire safety can be adequately maintained.

Tenant Responsibilities

While you will have a number of responsibilities, there are also a number of responsibilities that tenants will hold that you may wish to keep an eye on throughout their lease to ensure that things are operating safely within your property. These include internal health and safety, internal repairs and business-specific legislation changes. They will also be in charge of fire safety and any other responsibilities laid out in their lease:

  • Health and Safety – The Health and Safety at Work Act 1974 states that tenants are responsible for complying with fire safety regulations, offering a reasonable temperature for working, providing adequate lighting, space and ventilation, offering drinking water to employees, using safe and tested equipment, and maintaining all toilets and washing facilities. As a landlord, you may choose to offer support in these areas – such as with providing air conditioning and heating in the building.
  • Repairs – The tenant is often responsible for repairs within the property that have occurred as a result of their business activity, particularly before moving out or ending their lease. They should maintain the property as best they can throughout their tenancy, and ensure any repairs are carried out when they move out.
  • Following Legislation – Business-specific legislation (e.g. Kitchen safety) should be handled by the tenant according to the business they run and what is needed.

For more information regarding commercial leasing and how commercial landlord insurance can help you, we are on hand to provide advice or a bespoke quote to get you started. Simply get in touch with Ashburnham Insurance on freephone 0800 1696137 for more information.

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