Coronavirus: return to work requires landlords and tenants dialogue

Out-Law Analysis | 15 May 2020 | 11:26 am | 7 min. read

Commercial landlords and tenants must work together to enable a safe return to work from coronavirus lockdown in the UK.

Employers in England are responding to UK government calls and guidance to reopen shuttered premises, and employers in Scotland, Wales and Northern Ireland are set to follow in the coming weeks. There are issues of property law to be considered in tandem with the core issue of operational health and safety during this period. The issues across the different jurisdictions within the UK will be broadly similar.

This is part of a series of articles focused on unlocking business after lockdown.

Owner occupiers

UK government guidance states "as soon as practicable, workplaces should be set up to meet the new Covid-19 secure guidelines". Where you are the owner occupier of a building the way you unlock your premises will be governed by your business needs, the government guidance and specific health and safety and other regulations.

Where you need to modify your premises, the constraints will be statutory, such as planning and building regulations.

Tenants of stand alone buildings

Where you are the sole occupier of a stand alone building you will also need to consider the terms of your lease. You will probably have an obligation in your lease to comply with statute and this will include regulations introduced to deal with Covid-19. Although responsibility for compliance with statute rests with the tenant, a landlord who encourages a tenant to break the law or accepts money which is the proceeds of a crime may also be liable.

Physical alterations

Although many leases of stand alone buildings only require the tenant to get the landlord's consent to alterations if they affect the structure of the building or its external appearance or energy efficiency, a tenant must check its lease before starting any work. Works required to comply with statute may still need landlord's consent and the provisions of the lease will need to be reviewed in the context of the work you are proposing to do. Your legal advisers can assist you with this.

In most cases the landlord is obliged to consider any application promptly and cannot unreasonably withhold consent. What is reasonable will be considered in the light of all the current circumstances. The tenant may be obliged to reinstate the alterations at the end of the term. 

Change of use

As well as physical alterations, tenant occupiers may consider repurposing parts of their premises, for example to utilise outdoor space as seating areas or using restaurants to provide take away food. Again there may be statutory restrictions, such as planning consents, as well as provisions in the lease which need to be complied with. Your legal team will be able to help you with this.

Multi-let buildings

For landlords and tenants of multi-let buildings the situation is more complex. This is mostly because many of the areas of concern are common parts, used by more than one tenant. How do all parties ensure that the building is set up to meet the guidance and, for example, "ensure employees can maintain a two-metre distance from others, and wash their hands regularly"?

Controlling access 

Social distancing plans for the common parts will be the landlord's responsibility. Landlords will need to ensure that lifts are not overcrowded and that people do not congregate in lift lobbies or other common parts; for offices this may mean staggering the times people arrive.

Leases are likely to include an obligation on landlords to comply with legislation and a right for landlords to make regulations from time to time. This right may allow landlords to impose measures to ensure that social distancing rules are observed. Such regulations will need to take into account the needs of all the tenants in the building and this will require dialogue. The health and safety regime requires all occupiers of a building to co-operate and co-ordinate their activities to ensure the building can be occupied safely, and so this dialogue is not optional.

As well as regulations, landlords may consider investing in technology, such as temperature sensors to check people as they enter, and employing additional staff to ensure social distancing policies are observed – especially if they involve visiting members of the public such as to a retail environment.

Where these measures are necessary to meet statutory guidance then, where there is no specific head of service charge costs which would cover this, any "sweep up" clause in the service charge provisions should be considered. These generally cover other services it may be reasonable for the landlord to provide and compliance with government guidance on Covid-19 secure workplaces is likely to fall within such provisions. If related legislation is introduced, then the obligation to comply with statue in respect of the common areas would be sufficient to enable landlords to recover the costs through the service charge.

Cleaning common parts

In many multi-let buildings the toilets, and therefore the main hand washing facilities, will be in the common parts. The cleaning of these facilities, and the rest of the common parts, will be a significant part of any policy to reopen the building. Most leases will require the landlord to provide services, such as cleaning, to a "reasonable standard". Landlords and tenants should seek to agree what a 'reasonable standard' is in the current environment. If it is not possible to agree a standard we expect any court asked to determine the issue would take into account the need to provide a safe working environment at this time. 

Cleaning demised premises

Most leases include an obligation or covenant that the tenant will keep its own premises clean and this obligation is likely to be enforced more vigorously than previously. A failure to clean premises appropriately which leads to infection could be a breach of the lease as well as a breach of health and safety regulations in respect of a tenant's obligations to both its own employees and the other occupiers of the building. Other tenants of the building may also have a claim against the tenant and the landlord under the common law and also environmental legislation.

In practice, landlords and tenants may prefer to come together to agree a single common cleaning regime for the whole building. It is unlikely that a lease will oblige any party to enter into this sort of arrangement, but the health and safety regime does include an obligation to co-operate with other occupiers in a building. As well as good practical reasons for doing so in terms of disease control, there may also be financial benefits as large landlords may have access to contractors that individual tenants do not and the proportional costs of one contractor cleaning a whole building may be less than the costs for individual tenants each doing their own.

Hours of operation

It is anticipated that hours of business may change as occupiers try to stagger the times at which employees travel to and from work. Many leases only require the landlord to provide services during core hours, so consider whether these need to be extended and, if they do, whether all the tenants should contribute to the costs or only those who request the change. Regard should be had to the RICS professional statement for service charges in commercial property on this point.

Testing plant and machinery

In multi-let buildings the landlord will usually be responsible for the testing and maintenance of the heating, ventilation, and air conditioning (HVAC) and other systems. Occupiers may want this tested before they reoccupy the premises and the parties will need to arrange for the terms of the specific leases to be checked to see if the landlord is obliged to do this more often than annually. If the landlord does test the systems voluntarily, consider the need to document any agreement about who pays for the work if the service charge provisions are not clear. 

Upgrading plant and machinery

If equipment needs to be upgraded the questions to answer are whether the landlord is obliged to do the work and whether those costs can be recovered through the service charge.

The landlord is usually obliged to keep the equipment in repair. However, the equipment may not be broken just insufficient to allow the building to operate safely at this time of heightened risk, and so the improvement may be outside of the scope of the landlord's obligation.

In the absence of any statutory requirement for equipment to be improved, the provisions of the service charge and whether the improvements are in line with government guidance will be relevant in determining if the cost of such improvements can be recovered. However, since it is in everybody's interest, dialogue may enable the work to be done and paid for outside of the strict terms of the lease. It is advisable to document any agreement before work is started.   

Alterations by the landlord

Landlords may want to make other modifications to their buildings, for example to reduce touch points in the common parts. It is unlikely that the building will be in disrepair if the work is not done. However, if the lease obliges a landlord to comply with regulations and the works are needed to comply with the current regulations or those brought in under the Coronavirus Act 2020 or the Coronavirus (Scotland) Act 2020, the costs may be recoverable from the tenants.

Alterations by the tenant

As with other types of building the tenant may want or need to carry out alterations to its premises, and may need consent under the terms of the lease. These alterations may be physical or may be to repurpose parts of the premises. Again the terms of the specific lease will need to be reviewed in each case.

Many leases allow internal non-structural alterations without consent, so alterations such as moving desks further apart or installing demountable partitioning to create individual spaces may not need consent. However, more substantial works such as changing access arrangements may need consent. Again the terms of the specific leases will need to be reviewed in each case.

In cases where the works are being done to comply with new regulations this does not necessarily remove the need for consent. In most cases the landlord is obliged to consider any application for consent to carry out physical work promptly and cannot unreasonably withhold that consent. What is reasonable will be considered in the light of all the current circumstances. 

Practical steps

Whatever the lease says, it is in everybody's interest that people are safe. Many people will be anxious about returning to work and this anxiety will be dispelled more quickly if landlords and tenants work together to put in place policies and processes appropriate to that building and those occupiers. Landlords will need to ensure different tenants within a building co-operate with them and each other.

The key to unlocking premises after lockdown is communication.