compliance issues for businesses buying or taking a lease of premises

Take five guide - compliance issues for businesses buying or taking a lease of premises

When buying or leasing commercial premises, it’s essential to understand who is responsible for ensuring the building and any works carried out there comply with the relevant laws and regulations.

Here’s what you need to know.

1. What is a compliance with law clause?

A compliance with law clause (also known as a statutory compliance clause) is an important provision contained in the majority of leases. The clause sets out who is responsible for complying with statute by reference to both specific statutes and also general obligations. All parties to a lease should take care to read and ensure they understand their obligations within the compliance with laws clause.

2. What is the purpose of a compliance with laws clause within a lease?

The purpose of a compliance with law clause is to state whether the primary responsibility for compliance with statutes lies with the landlord or tenant. The clause can shift responsibility for compliance from the landlord to the tenant on completion of the lease, and act as a reminder to the new tenant of their new statutory compliance obligations.

The compliance with law clause can also give the landlord a direct right of action against the tenant where the tenant is not complying with its statutory obligations. In some cases the court is also given the power to apportion the cost of compliance between those with an interest in the property and have regard to the terms of the lease when deciding what would be a fair split of liability between the landlord and tenant.

3. Relationship between compliance with laws clause and other lease provisions

The compliance with law clause reinforces to tenants the need to consider laws and regulations when complying with other terms of the lease and should be read in conjunction with them. For example, when undertaking any works to the property in accordance with any repair, alterations and/or user covenants, the tenant should ensure they comply with CDM regulations, in addition to other relevant statutes such as planning or building regulations.

4. The tenant’s general obligation to comply with laws

Most leases require the tenant to comply with all laws, which will generally be defined in a lease. It is usually the case that a tenant will be obliged to comply with all laws relating to the demised property, its use and occupation by the tenant along with any service media and plant, works being carried out and any materials kept or disposed of at the property. The clause will also often require the tenant to provide copies of any notices received to the landlord and comply with any such notices.  A compliance with laws clause may also include tenant obligations in relation to specific legislation such as environmental regulations.

5. Landlord’s responsibility to comply with compliance with laws clauses.

Even though the general obligation to comply with laws clauses usually transfers responsibility onto a tenant, this does not prevent enforcement action being taken against a landlord and landlords should also be aware of such clauses.

A landlord may have enforcement action taken against them for any breaches of their responsibilities under planning law or building regulations or other legislation. Other legislation includes law relating to the management of asbestos, fire safety and discrimination.


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