Repair Obligations in Commercial Leases – Tenants beware
Commercial premises are often let on a full repairing and insuring (FRI) basis, whereby the tenant has responsibility to keep the premises in repair and to meet the costs of insuring the same.
Whether a lease will be granted on an FRI basis will depend on a number of factors, including the length of the term and the type of property, and will ultimately be a matter for negotiation between the parties.
Such leases will often contain a covenant obliging the tenant to keep the premises in ‘good repair and condition’.
It should be appreciated that such a covenant first obliges the tenant to ‘put’ the premises into repair, the practical effect being that the tenant is liable not only for any disrepair that arises during the contractual term but also for any defects or disrepair in existence at the commencement of the term.
A prudent tenant will undertake a survey of the premises prior to entering into the lease, so that they are aware of the extent of any works that may be caught by a full repairing obligation and the ensuing costs in this regard. This is of particular importance where the premises are being let as a whole, with the tenant covenanting to keep the roof and structural parts of the premises (in addition to any internal areas) in good repair.
Tenants may seek to limit their repairing obligation to a covenant requiring them to keep the premises in the state of repair and condition that it was in at the commencement of the contractual term. If the Landlord agrees to the same, the Tenant should procure that a schedule of condition is prepared documenting the condition of the premises (and clearly detailing any disrepair or defects), which should be annexed to the lease.
Where the lease is of part only of a building, the Landlord will normally retain responsibility for structural or common parts. Tenants will often be indirectly responsible for such repair, or a fair proportion thereof, by way of the reservation of a service charge.
The parties should seek professional advice at an early stage. Tenants in particular should ensure that they understand the extent of their repairing obligations, so that they can budget accordingly and make provision for any dilapidations proceedings that could arise at the end of the term.
For more information, please contact our commercial property team: