Tales of the unexpected – repair obligations in commercial leases

• Posted onSeptember 24, 2015

In order to avoid unexpected expenses later on, it is important that the parties to a commercial lease understand who will be responsible for the repair and maintenance of the various parts of the property both during and at the end of the term. It is also important to ensure that each and every part of the property is covered to avoid situations where part of the property is in disrepair but no one is obliged to repair it.

A landlord will want to ensure that their property is kept and left in a good state so that its value is not diminished and it can be re-let quickly at the end of the term. A typical lease may require a tenant to keep the premises in good condition (even if they are not when they are taken over). If the lease is for an entire building, it’s likely that it will be on a full repairing and insuring (FRI) basis, giving the tenant responsibility for repairing the building and reimbursing the landlord for the costs of buildings insurance. If the lease is for part of a building, such as a shop unit, the tenant might be responsible for internal repairs in their unit while the landlord takes care of the structure. A tenant may be required to contribute to the cost of the landlord’s maintenance through a service charge. If a tenant fails to keep up with maintenance, the landlord can serve a schedule of dilapidations requiring them to put things right or, failing that, to meet the landlord’s costs in doing so.

Usually a tenant will also be required to leave the property in good condition at the end of the lease term and a landlord will look to serve a terminal schedule of dilapidations if this is not the case. Once the lease has expired, the tenant will no longer be able to carry out any repairs so will simply face a monetary claim. For a tenant therefore, taking advice and starting negotiations with the landlord several months before the end of the lease is preferable, and a schedule of condition recording any defects at the outset can provide useful evidence for negotiations.

Naturally a landlord will not want to be unexpectedly left with premises in disrepair that will cost a substantial amount to put right, and equally an unexpected dilapidations bill may severely affect a tenant’s business. It is therefore vital that the parties carefully consider their obligations and seek timely advice both during and at the end of the lease.

For legal advice on repair obligations or any other commercial property matter please contact us or call 01452 411601.