Repairing obligations in a commercial lease
When a commercial lease ends the question “who pays for what, and how far does the tenant have to put the premises back?” is one of the most common questions our commercial property solicitors get asked.
Who is responsible for repairs in a commercial lease?
Gary Jones, Commercial Property Solicitor at Pearson, explains here the legal framework, common lease provisions, typical landlord remedies, procedural traps (including the Dilapidations Protocol), quantification principles (including the Section 18 cap), as well as practical advice for landlords and tenants.
“Most repairing obligations in commercial leases are contractual and tenants usually have obligations to keep the condition of the leased property in a certain state of repair,” said Gary Jones.
“When a lease ends and they leave the property if they fail to repair or replace then they risk breaching their lease, which is known more commonly in the property world as “dilapidations”.
“If when they end their lease a tenant fails to make good the property then the landlord can take remedial action; including making a schedule of the work that needs doing and serving it on the tenant, assessing their likely loss and requiring the tenant to respond.”
Full repairing and insuring lease
Full Repairing & Insuring (FRI) (when the tenant bears most repair and insurance obligations), internal repairing only, and the exact wording is decisive.
At lease end landlords commonly serve a schedule or quantified demand of dilapidations and follow the Dilapidations (pre-action) Protocol. This expects timetabled exchanges and a reasonable time is generally taken to be 56 days in practice.
Usual remedies are repair works paid by the tenant or damages (cost of works or diminution in value). Section 18 of the Landlord & Tenant Act can cap damages to the diminution in value caused by the breaches in respect of true repair obligations.
In addition, dilapidation claims are generally subject to the Limitation Act 1980.
What are repairing obligations in a commercial lease?
Repairing obligations are promises in the lease requiring the tenant to keep the demised premises (or specified parts) in a particular state of repair or to carry out work at expiry (often framed as an obligation to “yield up” in repair). They commonly cover:
- Day-to-day maintenance, decorations and minor repairs
- Structural items (walls, roof) where the lease is FRI
- Reinstatement obligations for tenant alterations
- Removal of trade-fixtures and chattels
The nature and scope depend entirely on the lease wording.
Typical lease types include a full repairing and insuring (FRI) when a tenant is liable for repair of the whole premises. Or an internal repairing only (IRI) when the tenant repairs internal parts only and the landlord retains external and structural repair.
“Wherever possible when there are arguments about dilapidations we encourage both parties to engage in meaningful mediation and at all possible opportunities to settle their differences outside of court by agreeing a schedule of works.
“Sometimes a tenant will argue fair wear and tear or try to show that the lease did not require particular works to be carried out, so it’s always advisable to be aware of the situation and review policies and contracts towards the end of any lease or when a tenant gives notice,” said Gary.
“In some cases, we find that a pre-expiry inspection clause allowing final pre-expiry inspection and a timetable for remedial works can save dispute and cost.”
How can we help?
For legal advice on repairing obligations in commercial leases or lease renewals contact our commercial property solicitors on 0161 785 3500 or email enquiries@pearsonlegal.co.uk
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