Property management in changed times

Posted: 26 July 2021, in News

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With long periods of lockdown and closure, returning to premises post pandemic involves consideration of duties as occupiers. Things, however, have changed as businesses now require to operate under the “new normal” taking account of both additional guidelines and new working practices.

It will be important to ensure that enterprises operating under the “new normal” are complying not only with their obligations as employers under government guidelines but also their obligations owed to landlords under leases. The economic impact of the pandemic can mean ever tighter controls on budgets and it is important to look at ways to mitigate costs and minimise exposure in future leasing arrangements.

While enterprises should already have been complying with pre-COVID obligations (e.g Fire Risk Assessments, management of asbestos etc) they will also need to consider how the return to workplaces and compliance with COVID social distancing guidelines will impact on existing risk assessments. As compliance with the guidelines will in some cases result in reconfiguration of office spaces, it will also be important to ensure that any risk assessments are updated to take account of those reconfigurations. 

As premises may in some cases have been vacant for some time, the repair and condition of the property should be examined to ensure no deterioration or defect, and systems may also require inspections and servicing which were not carried out in lockdown phases.    

As well as compliance with guidelines, it is expected that operational costs will come under even more scrutiny given the impact of the pandemic. For existing leases it would be wise to review in detail any levied service charge or common repair costs in order to ensure that the charge is both the correct proportion and properly chargeable.  

There are however opportunities to make some terms more favourable. In managing existing property arrangements, enterprises should actively look to utilise expiry dates or break options to negotiate a more favourable position for any extended period of lease. That could involve many things including a reduced rent, further break options, pandemic clauses, changing the frequency of rent payments, capping service charges and so on. Renegotiating or re-gearing terms of leases should be considered where possible and tenant break options and renewals could be utilised to leverage those amendments.

The new normal may see a number of businesses relocate to smaller or differently configured premises and in negotiating any new heads of terms it will be important to restrict as far as possible operating costs. Particular attention should be paid to the condition of the property and obligations to repair. Where there are service charges applied, exclusions should be looked at carefully and a cap is recommended.     

Every opportunity should be taken to introduce more favourable terms and, in particular, pandemic clauses into leases which would set out more certainty for future lockdowns, or dare I say it, further pandemics. 

Emma Gray, Partner, Commercial Property, Blackadders LLP