Repair Covenants In Commercial Leases

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Leases routinely require tenants to carry out repairs and re-decoration both internally and externally. The clauses within a lease can be hard to interpret, yet they have a huge impact on the costs which a tenant may incur over the course of a lease and also at the end of the term. It is therefore important that a tenant is familiar with their obligations at the outset.

The 2007 Lease Code recommends that:

“Tenants’ repairing obligations should be appropriate to the length of term and the condition of the property at the start of the lease”.

More often than not Commercial Leases are usually full repairing and insuring (FRI) Leases. This means, for example, that if a property is a single unit the Tenant will have to arrange and pay for all repairs to be carried out at the property and they will have to reimburse the Landlord for the costs of insurance by way of an insurance rent. The tenant, if he accepts this, is thereafter obliged to keep the property in good repair and condition throughout the term of the Lease.

Despite the recommendations of the Code, repair obligations in the lease are usually very onerous for the Tenant and require them to keep and put the Property into first rate repair and condition even if it isn’t in such condition at the start of the Lease.

As a general rule you should always endeavor to limit your repairing liability. Time spent doing this upfront will pay dividends both during and at the end of the lease. As a starting point a tenant should ensure that they fully inspect the current state and condition of the property, and in an ideal scenario they would commission a full building survey by a Chartered Surveyor to include all buildings demised and external areas.

Should the premises be in poor condition, several options may be open to the tenant. One option would be to have the building brought up to standard by the landlord prior to taking occupation i.e. to ensure that on the date of entry it is in a good and tenantable condition and repair and fit for the purpose for which it is let. An alternative would be to carve out certain items from the repairing obligation, for example the roof. A further option would be to limit the repairing covenants by reference to a Schedule of Condition highlighting the state of the property at the date of entry. This requires careful consideration and negotiation and accurate drafting specifying that the property will be returned in no worse, but no better, condition than it is at the date of entry as evidenced by the schedule. Any of these options acts as a limitation on the ‘full repairing’ obligation in the lease. Our Commercial Property Team offer a fixed fee lease report which will flag up any issues you may have regarding repair obligations.

For further information contact our Property Solicitors on 0800 689 0831 or make an enquiry here.

 

Stacey Lakeland

About Stacey Lakeland

Stacey Lakeland is a Trainee Solicitor within the Property department at Forbes Solicitors. Stacey’s blogs cover general property matters relating to both residential and commercial property matters such as updates to legislation affecting the property sector, landlord and tenant matters, topics which relate to the construction and development sector and also issues relating to property disposals and acquisitions, to name a few.
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