News | May 11, 2020

The Future Office – legal issues for landlords, tenants and agents

“Those who cannot change their minds cannot change anything” said George Bernard Shaw. As we look forward to the easing of lockdown, what changes can we expect to challenge landlords, tenants and managing agents?

  • A focus on building management. The World Health Organisation recommends running air conditioning 24/7 and increasing natural ventilation.
  • Greater emphasis on health and safety: frequent desk and meeting room cleans during the day, continued promotion of sanitisers and perspex screens at reception desks are amongst the changes predicted by the British Council of Offices.
  • Staggered working hours, to flatten the rush hour curve on the commute and on arrival to buildings.
  • A move toward touch free ways of moving around, whether this is security badges, lift access or doors.
  • An increased use of technology, to monitor your body temperature on arrival, establish occupancy levels and respond dynamically to optimise air conditioning

All these predictions come with legal implications. Although it may feel like unchartered territory, lawyers have worked through novel situations like the “Y2K bug” and dramatic legal changes before. Remember that what you do to keep safe in the short term may not be the same as what’s needed if a COVID-19 vaccine becomes available in future. Key points to consider in existing leases include:

  • Who pays? This will be determined by the service charge terms of the lease, clauses which are individually negotiated. Case law has provided important protection for tenants especially if costs must be “reasonable” and the lease has only a few years left to run.
  • Who’s obliged to do the work? At law there’s a critical distinction between a repair and an improvement.  It may be that the only acceptable way to repair involves replacing one item with something that’s actually better, but that doesn’t mean an out of date item which is still fit for purpose has to be changed.
  • What’s reasonable? Landlords generally have the right to make regulations governing the use of a multi-let office building and its common parts.  However if these are too strict or unworkable, that might breach the covenant for “quiet enjoyment”.  Lease aficionados will know quiet enjoyment has nothing to do with either noise levels or fun.
  • Who’s watching you? Any technology used needs to comply with data protection laws.  Take particular care with personal data and how it’s used and stored – body temperature does show fever, but also tracks women’s ovulation patterns.
  • How will we work? Employees need to be confident they can come to work safely.  Can FM teams provide data on the air-conditioning, or use cleaners in the working day as evidence of their commitment to hygiene? Beyond that, tenants may need to provide their staff with motivation to risk the commute: if you’re not coming into work for a desk and a screen, is a re-fit of the space called for? Some alterations need consent unexpectedly, especially if there’s an impact on the building management systems.
  • Remember the planet? How will environmental obligations and aspirations be balanced with the need to avoid contact and re-use.

What if you’re negotiating a lease right now, or about to renew one? We expect:

  • An effect on the length of a rent free period for initial fitting out. Is three months long enough?
  • Explicit wording around any changes to the mechanical and electrical services within buildings
  • Better clarity on the standard of services a landlord will provide. Will tenants pay for what’s “reasonable” or only for what’s “necessary”?
  • What’s the effect on the market? With space a key consideration, will out of town campus developments command a premium over city centre space? It’s possible companies will move into flexible workspaces for a year or two while they work out what function their office really serves