Essential Safety Measures (ESM) for commercial property

As a landlord, it is your responsibility to ensure that essential safety measures (ESM) are maintained on commercial property you own. The laws and regulations around this will be changing sometime in 2020. 

Below, we’ve broker down the current ESM laws and the ways these might change in the near future.

What exactly is ESM?

Essential safety measures are measures that need to taken in any property to ensure the safety of everyone inside. This can include things like smoke detectors, sprinklers, fire extinguishers and exit signs, and annual safety inspections.

ESM can be classified into numerous categories:

  1. Building fire integrity;
  2. Means of egress;
  3. Signs;
  4. Emergency lighting;
  5. Fire fighting services and equipment;
  6. Air handling systems;
  7. Automatic fire detection and alarm systems;
  8. Occupant warning systems;
  9. Lifts
  10. Stand-by power supply;
  11. Building clearance and fire supplies; and
  12. Mechanical ventilation, hot and cold water systems.
As it stands, landlords are responsible with the upkeep of all ESM and, most importantly, these cannot be passed over to the tenant. That being said, the tenant can take charge of maintenance of ESM; in this case, the landlord will still need to cover the costs.
 
The ESM Maintenance Manual provides guidelines to landlords and commercial property owners on how to meet their regulatory obligations.

What are the proposed changes?

Following the Small Business Regulation Review, which concluded in June 2018, the Retail Leases Amendment Bill 2019 proposing changes to retail leasing laws was presented to the Victorian Parliament.

There are a number of amendments that are included that benefit both landlords and tenants. Specifically looking at ESM in commercial property, there are a few things you need to be aware of:

  • The Building Act 1993 will be amended to include subsection 2A, which states that a tenant cannot set off from the rent any amount expended on ESM if they have agreed to bear those expenses under their lease agreement;
  • An exemption will be added to the Retail Leases Act 2003 to allow landlords to recuperate costs of ESM if the parties have agreed to do so in their lease agreement.

If this Bill is passed, commercial landlords will be able to recuperate part or all of ESM maintenance costs from the tenant. This includes repairs and general upkeep, as well as any installations that the tenant has agreed to pay for.

It is important to note that your lease agreement must outline who pays for ESM upkeep. The tenant must agree to take responsibility for these expenses- either in part or in whole- as outlined within their lease agreement. This applies to both existing and new leases.

Given that a majority of leases are already negotiated to address ESM, this may mean that there will be no changes in your situation. The intent of the Bill is eliminate any chance of ambiguity and outline clear parameters of action for both landlords and tenants.

The changes do not negate the landlord’s obligations, as they are liable and must ensure that all ESM items are present and functional.

Moving forward, you will need to negotiate your lease with your landlord or tenant to include a clause that specifies which party is responsible for:

  • expenses relating to ESM recoverable items;
  • how much each party will contribute?;and
  • who will ensure that maintenance is performed on a regular basis.

If you have any questions about your legal obligations regarding ESM or how to negotiate a current or new lease agreement, feel free to contact our office on (03) 8590 8370. 

As the Bill has not yet been enacted, there may be some changes to the information outlined above. We will keep you up to date with any changes over the year. 

This update does not constitute legal advice and should not be relied upon as such. It is intended only to provide a summary and general overview on matters of interest and it is not intended to be comprehensive. You should seek legal or other professional advice before acting or relying on any of the content.

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