The relationship between landlords and tenants has always been uneven. From a legal point of view, there are a few relationships as one-sided. I can’t think of any other contractual situations where the supplier of a service or product receives payment up to 3 months in advance, where one party has the right to increase prices without reference to the other, and where the consequences of non-performance can result in such swift and far reaching court proceedings.
Historically, tenants and in particular, commercial tenants, have been in a very weak position.
But the 21st century digital revolution, and now the coronavirus crisis is likely to level the playing field. Tens of thousands of commercial premises are lying empty, with no prospect of them being occupied in the short to medium term. To their owners, premises without occupiers are liabilities rather than assets, with mortgages, rates and insurance requiring payment without a return.
Tenants should now be in a much stronger position to negotiate their tenancies. So is it time to get rid of the old chestnut clause found in so many leases:
“The tenant will at its own cost observe and comply with all legal obligations relating solely to the premises, or to its use of them”?
Are tenants not now in a position to demand that the premises they pay good rent for are statutory compliant with the FSO from the outset of the lease? Why should a tenant foot the bill for structural compartmentation, fire doors, fire alarm systems, emergency lighting and any other general fire precautions which form part of the fabric of the building are fire safety compliant?
Is it not in a landlord’s interests to make sure that his premises are safe in this way?
Following the coronavirus pandemic, ‘lockdown’ and the resulting recession, rents are surely likely to fall. Tenants will be in a much stronger position to argue for rent to be calculated as a percentage of revenue and basic statutory compliance as a starting point for negotiations. Landlords need to understand that fire risk management responsibilities should be seen as a partnership, where both parties can benefit. Landlords can protect their premises and benefit from lower insurance premiums and obviously the risk of fire. Their premises will become more marketable. Tenants can deal with the maintenance of premises and risk assess their business in accordance with the sound infrastructure provided by the landlord.
Article 22 of the Fire Safety Order already requires those who share fire responsibilities in relation to premises to ‘co-operate and co-ordinate’ to ensure compliance. An outdated clause which attempts to place all the responsibility upon one party is not consistent with the requirements of the FSO and has no place in today’s leases or contracts. It should now be negotiated out.
But it is not just the odd clause that should be considered. Few commercial leases deal with the FSO at all, and fire risk management responsibilities at all. This means that when breaches are found – both parties are likely to be liable. Care should be taken at the outset to outline the duties of the parties.
A new balance should be found across the rental property market. With more people working from home, the decline of the High Street, and an inevitable recession to come, office space is likely to be released and applications to convert from commercial use to domestic use will be commonplace. Domestic tenants are already protected by Housing Act requirements, and premises with multiple occupancy by the Fire Safety Order. Now is the time to demand compliance and shared responsibility from landlords as a prerequisite to any commercial rental contract.
