RE:Occupy - Managing the reoccupation of your premises
18 November 2020
With a fresh lockdown in place until early December – at least – corporate occupiers are once again faced with considering how best to manage their return to offices. Occupiers have already briefly experienced life back in premises under Covid-measures, including ensuring they, and their landlords, comply with health and safety guidelines, protect against possible contractual or negligence claims from their employees So, who is liable for what?
In order to answer this question, an occupier should consider how the premises are occupied:
Lease of a whole building
If an entire building is leased with the tenant occupier being responsible for the structure and common parts including areas such as the reception, toilets, lifts and staircases, then liability for statutory compliance and compliance with health and safety measures will sit fully with the tenant. The tenant will also have a duty of care to ensure the premises are safe for all those who access it. In order to discharge its obligations, it will be necessary for the tenant to carry out a full risk assessment before returning to the office. The tenant will be responsible for the safety of its employees, any subtenants, licensees, contractors and visitors to the building from the moment that they enter the building. For further information as to how to undertake a risk assessment and approach return to work planning, see our guidance on managing a safe return to work.
For tenants who are also employers, it is a statutory requirement that they consult with their employees (or designated health and safety union representatives where a trade union is recognised) about the health and safety measures they propose to implement. Further, all employers with more than 50 employees are expected to publish their risk assessments on their websites.
As well as carrying out a full risk assessment, it is also advisable to check the terms of the lease to see who is responsible for third party/public liability insurance. If that liability sits with the tenant (which it may well do in this scenario), then the insurance policy should be reviewed to ensure that sufficient cover is in place for notifiable diseases – Covid-19 is now a reportable disease under RIDDOR, regulations which govern the reporting of accidents at work to the Health and Safety Executive. Many policies are narrowly drafted and may not specifically cover Covid-19.
If an occupier has tenants or licensees in occupation of the building for which it is responsible then, subject to the terms of the relevant sublease or licence, the occupier of the entire building may be able to re-charge the costs of social distancing and other health and safety measures in the common parts and additional cleaning regimes to its subtenants and licensees via the service charge provisions.
Where physical changes need to be implemented in the building such as the erection of partitioning it will be important to check the “alterations” clause in the lease to establish whether the landlord’s consent is needed for any alterations. Since consent for such works can often take many weeks to obtain (especially if dealing with a landlord registered overseas), it will be important to establish at the earliest opportunity whether consent will be needed for such alterations, so that this can be applied for as soon as possible. Works implemented without the proper consent will be a breach of the lease, which could ultimately trigger forfeiture if landlord’s consent is not subsequently obtained. At the moment, there are no special arrangements in place allowing tenants to carry out works on an expedited basis without consent due to Covid-19, so all parties must comply with their lease obligations.
Lease of whole building excluding structure and common parts
In this situation, the landlord will have retained control of the common parts and the structure, and will be under an obligation to ensure that all health and safety legislation is complied with, and the duty to provide a safe place of work or premises discharged in relation to areas such as the reception, lifts, staircases, loading bays and any other common parts and amenity space. It will be the landlord’s responsibility to carry out risk assessments and put in place any changes necessary to ensure safe movement of visitors and tenants around the building. There may be increased cleaning regimes or changes to the access to the premises so as to control flows of people through the building.
Tenants will have separate health and safety obligations with respect to the parts of the building they occupy. They will need to undertake their own risk assessment as described above. Whilst they do not have control over the common parts, tenants who are employers will also have a duty of care and statutory health and safety obligations to their employees and so should satisfy themselves that the landlord has taken appropriate health and safety measures in relation to those areas.
In practice, it is likely to be difficult for commercial landlords to restrict entry to a building or lift or stairwell by having, for example, staff queuing outside, to limit the flow of people in a building at any one time. Whilst some businesses may be able to phase the time of staff arriving or departing, this is likely to prove impractical in large multi-let offices. Landlords will clearly have to work closely with their tenants to try and find a workable solution to this issue.
The costs of any such changes and additional cleaning regimes will be recovered from the tenants via the service charge. The only relief from these potential additional service costs, will be where a tenant has a fixed service charge or a capped service charge.
Tenants may think that their landlord has no right to implement additional measures not expressly referred to in the lease, and to recharge the costs to the tenants in the building, and that this should be the landlord’s responsibility and part of its “investment” costs. However, most service charge regimes include a “sweeper” provision, which allows a landlord to vary existing services, or implement new or additional services, which are in the interests of the tenants or the management of the building as a whole. Therefore, it is likely that the landlord will have the power to introduce additional measures as a result of social distancing and additional cleaning regimes, signage etc. and to recharge the costs to the tenants in the building.
Most leases within a multi-tenanted building provide for the tenants to comply with regulations, which are notified to the tenants from time to time. It is therefore likely that the details of any new access requirements or cleaning or circulation regimes to be implemented will be introduced via regulations. Breach of the regulations will usually constitute a breach of the lease.
Lease of part of a building e.g. a whole or part of a floor or smaller self-contained unit
The position of the tenant occupier will be the same as for the situation in which there is a lease of whole building excluding structure and common parts, as described in the section above. However, it may throw up additional practical issues where there are several tenants on the same floor that share a communal kitchen and/or toilet.
Any specific alterations that the tenant will want to carry out within the premises themselves will be likely to require the landlord’s consent, so it will be important to check the terms of the lease to see what is permitted and what alterations will require consent.
In some short-term leases of, say, three years or less, it may be possible that all alterations are strictlyprohibited.
The Covid-19 crisis has not relieved landlords and tenants from having to comply with their leases and, if alterations are prohibited, but an occupier needs to carry out works in order to make a return to the office safe for its staff, then the occupier will have to approach the landlord and ask for express consent to carry out the necessary alterations. There is no obligation on the part of any landlord to provide consent in such a situation. It would be hoped that landlords will be reasonable and do what they can to assist tenants: not least because the sooner that the tenant is able to re-occupy the premises, the sooner the tenant will be able to re-commence its business to its full capacity and, presumably, landlords will be wanting to help their tenants to get back to business and be more secure in terms of paying their rents. However, some landlords with plans for redevelopment may see this as an opportunity to be obstructive and withhold consent, purely in order to obstruct a tenant from re-occupying and force an early exit of the tenant from the building by way of a surrender or forfeiture due to insolvency.
Licence/serviced office/co-working/desk-sharing agreement
Although it will depend upon the precise wording of the occupational agreement, in this scenario, a landlord is very likely to have retained responsibility and liability for compliance with statutory health and safety legislation and will have a duty to make the premises safe for the occupiers. It will have an obligation to undertake a Covid-19 risk assessment. The costs associated with any additional works, access measures or cleaning regimes etc., will form part of the service charge and be recovered from the occupiers pursuant to the terms of the occupational agreement.
In many such agreements, an occupier may well have paid an “all-inclusive” rent, which will be fixed or capped and so, in these arrangements, any additional costs are likely to fall to the landlord and will be irrecoverable from the occupiers. However, it is important to check the precise wording of the occupational agreement carefully, as every landlord takes a different approach and some agreements do allow for the rent or membership fee to be increased in specific circumstances.
If the occupier has taken a specific area in the building, or a significant area, then it is far more likely that the landlord will have handed over liability to the occupier. In which case, the position is more likely to be akin to the ‘lease of part of a building’ scenario described above.
General compliance with health and safety law
In addition to undertaking a risk assessment, businesses must also ensure they comply with all government guidance about re-opening. This includes sector specific guidance on working safely during Covid-19.
The potential ramifications for not doing so can be serious. A failure to consult with employees about the health and safety measures you are implementing or to implement adequate health and safety measures to minimise the risk of transmission of Covid-19 could lead to the Health and Safety Executive or local authority issuing enforcement notices, fines or bringing criminal proceedings, which may lead to imprisonment. Additionally, individuals may bring personal injury claims; albeit that in order to be successful, they would need to establish negligence on the part of the landlord, tenant, employer etc.
Businesses can also be vicariously liable for the negligent acts of their employees, so it is important to provide training on the health and safety measures you have implemented to ensure individuals are clear about the standards of conduct which apply.
Covid 19 - Coronavirus
Our advice on responding to the coronavirus outbreak.
The Covid-19 pandemic has affected nearly every business in the country with many employees having not attended their usual workplaces since Spring 2020. But with most restrictions now having been lifted, what issues should landlords and tenants consider as they look ahead and plan their use of commercial premises in the coming months?