Top 5 Commercial Landlord Responsibilities

Top 5 Commercial Landlord Responsibilities

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1. Compliance With Building Codes 

State and local governments require commercial property owners to comply with standards of safety, habitability, and accessibility. While you might think that the building you are going to lease is "up to code", many are not. Depending on the current state of the building, landlords will need to fix and adjust issues before leasing or renting out space.

Compliance is not a one-time thing though. Building codes have sections and specifics that change over time, so it is important to keep up to date and have your property regularly inspected. Landlords who do not meet certain standards and decide to lease anyway will face serious legal repercussions. Whether due to ignorance or negligence, non-compliance will have a negative impact on businesses

2. Negotiating Clear Terms for the Lease Agreement 

When negotiating a commercial lease, every clause in the agreement must be examined to see how it defines the rights and responsibilities of the tenant and the landlord. Your lease should clearly define your space, its size, and whether the size is on a rentable or usable basis. A thorough explanation of all aspects of the property, including “usable” space should be clearly indicated in the contract.

When delegating certain maintenance responsibilities, here are a few questions to consider: 

• Who will be accountable for cleaning the leased space? 
• What alterations can the tenant make? 
• What are the repairs the tenant should be responsible for? 
• What is considered a timely response for minor repairs? 

3. Minimizing Risk and Liability 

Every property owner wants to protect their investment. Water damage, break-ins, faulty equipment all require preventative measures to prevent a disaster. The amount of work to prevent loss and damage will have a direct influence the quality of your insurance coverage, safety guards, and more. 

On a consistent schedule, you should be inspecting these areas of risk: 

• Locks on doors and windows
• Security systems and cameras
• Smoke and fire alarms 
• Roofing and paneling 
• Electrical and heating units

4. Duty to Maintenance and Repairs 

Many commercial leases provide that the landlord will be responsible for“structural repairs”.   Unless the scope of structural elements is expressly identified in the lease, the common interpretation of a structural element is one which is necessary to hold the building together, such as foundations, walls, roofs and floor structures. Those elements which are necessary only for the use made of the building such as partition walls, stairways and windows, or merely “decorative” features such as carpeting are typically not included. Mechanical systems, such as heating and plumbing, are generally not considered structural elements. Accordingly, most of the responsibilities for repair and maintenance of building elements that require maintenance will fall to the tenant.

Generally, a commercial landlord is responsible for the following repairs (unless the lease agreement states otherwise):

• Roofing repairs and replacement;
• Exterior wall repairs; and
• Repairs to utilities such as plumbing and electricity.

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Unless otherwise negotiated, all other repairs are generally the responsibility of the tenant. Also, if the items the landlord is responsible for are in bad repair and it impacts your business, generally you are out of luck. A commercial landlord has limited duties.

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Common commercial landlord responsibilities include: 

• Heating and air conditioning 
• Removal of waste and hazardous materials
• Electrical units 
• Communal areas, such as bathrooms and hallways 
• Window and door security 
• Water faucets and piping 

5. Obtaining Diverse Insurance Coverage

Depending on the individual risk characteristics of your business, different coverage options are available for commercial insurance. When all is said and done, it is the landlord’s responsibility to choose the insurance that best fits their business plan.  Since commercial insurance can be complicated, you should feel free to discuss any terms, conditions, or concepts that are unclear to you with a licensed broker-agent. 

While your business may not need all commercial coverage lines, it is a good idea to have a basic knowledge of the types of insurance coverage available.  As your business changes and expands you will have the necessary knowledge to purchase insurance coverage as new exposures arise.  The following commercial lines of insurance cover broad areas of exposure common to most business operations:

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Property Insurance 

• Commercial Property 
• Inland Marine 
• Boiler and Machinery 
• Crime

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Casualty Insurance 

• Commercial Automobile 
• Commercial General Liability
• Commercial Umbrella 
• Workers Compensation

Final Thoughts

It is imperative for both tenants and landlords to have an in-depth understanding of the rights and responsibilities of each party. They must consider what it means for their rental agreement. This can help both parties to avoid breaking the covenant. It’ll also help ensure that they are protected from legal action. 

No matter the type of property you own, you can count on the experts at Evanco Realty Advisors for the very best in full-service commercial administration. We provide everything you need to minimize your ownership workload and maximize the return on investment for each of your commercial properties. We provide peace of mind to owners; implement excellent property management services that enhance value for landlords.

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