What is expected under a full repairing and insuring lease
When you enter into a commercial lease, your landlord will want this to be on a full repairing and insuring (FRI) basis. This means that you will be responsible for repairing and maintaining or where the landlord retains responsibility charge you for repairs as part of a service charge. In addition to this the landlord will expect to be reimbursed for the cost of building insurance. If the property is already in a dilapidated state, or you are taking a short lease, you may be able to negotiate less onerous obligations. It is important to get advice from an expert solicitor before you agree the deal, as they will make sure you understand the sort of repairs you should expect to carry out and those which are the landlord’s responsibility.
The wording of your obligation to repair
Your repairing obligation will usually require that you keep the property ‘in good and substantial repair’, although your landlord may expand this to ‘good and substantial repair and condition’. It is important to understand that an obligation to ‘keep’ the property in good repair implies that you must bring it up to good condition even if it is dilapidated when you enter into the lease.
What counts as repairing?
A surprising number of disputes arise over whether a tenant’s repairing obligation has been triggered and whether work required counts as repair or goes beyond that and becomes an improvement. As a tenant, you are only required to repair a part of the property leased which is in disrepair, which means that it has deteriorated in some way.
What counts as ‘good and substantial repair’ depends on the age of the property. You would not be expected to bring a unit built in the 1960s up to the standard of a brand-new one. This is a fair position, but the problem is that it leaves room for debate about the required standard of repair. If you are worried about this, you should ask your solicitor to include wording in the lease setting out what work you are expected to do to deal with any repairs that are already required at the start of the tenancy.
If the property is in a poor state of repair at the outset, or you are taking a short lease, it is common to agree a schedule of condition. This is a record of the state of the property, including photographs and a written description. Once you have agreed this with your landlord, it will be attached to the lease and your solicitor will agree wording which limits your repairing obligation to keeping it in no worse a state than is shown in the schedule. Depending on the circumstances, you may even be able to limit your obligation to leaving the property clean and tidy (sometimes referred to as broom-swept) at the end of the lease, as long as you have not caused any damage.
Multi-let buildings
If you are taking the lease of a unit in a multi-let building, you should pay particular attention to the detailed description of the premises, because that will govern which parts you have to repair and which parts are left to the landlord. The landlord would usually be responsible for the roof and structure, and for lifts, internal security systems, shared parking and other common areas but will recover the cost from you as part of a service charge. Where a building is in a poor condition it may be possible to agree exclusions in the service charge to limit your liability for expensive repairs.
The impact of insurance
In a full repairing and insuring (FRI) lease, the landlord will insure the building and you (and other tenants if it is multi-let) will be required to reimburse the landlord for the premium. Damage caused by an insured risk will be excluded from your repairing obligation, because the landlord will claim on the policy and use the insurance money to pay for repairs. You should ask your solicitor what the lease says about damage caused by something against which the landlord has not been able to get insurance. This is not common, but it does happen occasionally in relation to risks like terrorism and flood. If the lease is silent on this you could be responsible for repairing the damage, so it is worth trying to negotiate clear provisions for sharing the cost of uninsured loss between you and the landlord.
Statutory obligations
In some situations, you or your landlord may want to make alterations to a property to comply with a statutory obligation. Examples include reasonable adjustments for people with disabilities or energy efficiency improvements. These do not come within the definition of repair and it is usually a matter of negotiation between you and your landlord as to whether works may be carried out and by whom.
How we can help
You are most likely to get into a dispute over repairs when you come to move out after the lease expires or if you have exercised a right to break the lease. Our commercial property experts can help you avoid unwelcome arguments, expense and delay by making sure you know exactly what the landlord will be expecting before you enter into the lease. It is never wise just to rely on common sense and assumptions when it comes to repairs and commercial lease.
For further information, please contact David Marsh in the commercial property team on 01733 882800 or email [email protected].
David Marsh, Senior Associate
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