Adjusting to the ‘new normal’ is a topic which everyone in the property industry is now seriously starting to consider as we begin to look ahead to what working life will look like as the more stringent restrictions imposed by the lockdown are gradually relaxed.
Those adjustments apply equally to the property industry as they do to any other and the purpose of this note is to identify and discuss a number of practical and commercial issues which landlords and tenants in the office sector should think about.
Many office buildings have been empty or virtually empty since the Government’s lockdown came into force in March. As a consequence, building services in those office buildings such as heating and air conditioning have either been switched off or have been operating at a minimal level since then. As offices begin to reopen, it will be necessary to think about the following issues:
- Are the systems and equipment in buildings fit for purpose in light of what are likely to be more stringent regulatory requirements as the lockdown is eased?
- Does any equipment need to be inspected, cleaned or serviced before being re-started?
Landlords of multi-let premises will need to consult with their tenants about their ability and willingness to take up occupation again. Whilst Government guidance may be that certain classes of business can return, it does not necessarily follow that tenants within those classes will want to return. It will be important for landlords to establish as early as possible which tenants will wish to return to offices as the lockdown is eased so that a phased approach can be implemented.
Landlords and tenants alike owe a duty of care to their occupiers, visitors and employees. Both will need to ensure that their duty is fulfilled.
Landlords should consider adopting the following additional safety measures:
- installing flexiglass barriers where appropriate,
- placing adequate signage around the building about social distancing,
- implementing one way systems,
- having sufficient supplies of hand sanitiser and washing facilities in the common areas,
- implementing more regular deep cleaning of the building,
- providing clear guidance on waste disposal and the handling of post, packages and deliveries.
Tenants should consider adopting the following additional safety measures:
- make regular announcements to remind visitors and employees to follow social distancing advice and wash their hands regularly,
- reconfigure work areas (possibly by the use of screens and partitioning) so that the new layout conforms with social distancing advice,
- provide additional handwashing and hygiene facilities within their demise,
- producing policies and guidance to visitors and employees for any new behaviours that will be required within the premises,
- splitting employees into different teams with each team alternating between working from the office and working from home so as to limit the total number of employees in an office at any one time,
- encouraging employees to bring their own food, and either closing canteens or moving them to providing takeaway services only,
- limiting or restricting altogether the use of communal facilities and break out areas.
Landlords and tenants should both be aware that it is likely that we will see additional health and safety legislation relating to the management and occupation of commercial buildings to deal with the ongoing risks which Covid-19 poses and so they should both keep a close eye on the websites of the UK Government, Public Health England and the Health and Safety Executive for additional guidance.
Landlords and tenants will need to work collaboratively to manage issues arising out of the shared use of common parts such as lobbies, stairs, lifts, cycle racks, toilets, showers, washrooms and changing rooms. It will also be important to review fire and other emergency evacuation procedures. In light of the Government’s encouragement for people to use cycles to get to and from work wherever possible so as to avoid public transport, landlords will need to factor in that there is likely to be an increased demand for commuter facilities such as cycle racks, showers and changing rooms.
Landlords will no doubt seek to recover any additional costs which they incur in relation to cleaning and preparing the building for social distancing in line with the suggestions made above via the service charge, even though landlords will not have anticipated any of those additional costs when they prepared their annual service charge budgets pre-COVID-19. Whilst the ability of tenants to challenge landlords’ attempts to do that will ultimately depend on the interpretation of specific service charge provisions within leases, there are a nevertheless a number of general observations which can be made:
- It is likely that the cost to the landlord of providing the additional services will be recoverable via the service charge, even if they are over and above the budgeted amounts. Services are usually required to be reasonable or provided in the interests of good estate management. It will probably be difficult for a tenant successfully to claim that the provision of those additional services is unreasonable or not in the interests of good estate management unless they are totally disproportionate in the context of the building itself and Government guidance.
- Some service charge provisions allow landlords to recover costs through the service charge which they have incurred as a result of the need to comply with applicable laws and regulatory requirements. Whether or not landlords are able to rely on this type of provision will depend on whether the Government enacts primary or secondary legislation which legally requires additional measures to be taken in relation to buildings.
- The ability of landlords to recover the costs of providing additional services will remain subject to any service charge caps which were specifically negotiated into leases by tenants.
- Where tenants pay service charge inclusive rents, the costs to the landlord of providing the additional services will be a direct cost to landlords which cannot be recovered from tenants.
- Landlords of multi-let properties in which some tenants return whilst others do not either because they choose not to or because they are prevented from doing so as a consequence of Government policy will need to consider very carefully how the service charge ought to be calculated.
For further information regarding the issues raised here, or for more specific advice, please contact a member of the Property Litigation team.