When entering into a new commercial lease, understanding your repairing obligations as a tenant is essential.
These obligations can have significant financial implications, and overlooking them could result in unexpected liabilities down the line.
Below are the key considerations you need to be aware of.
What does a full repairing lease mean?
A full repairing lease places the responsibility for repairs squarely on the tenant. If the property is part of a larger building, such as an office block or shopping centre, external repairs may fall to the landlord, but costs are often recovered through a service charge. It’s crucial that the lease clearly defines what services are covered and how they’re managed, so both parties understand their responsibilities.
Understanding the standard of repair
The standard of repair required depends on the wording of the lease and the condition of the property at the outset. A clause requiring the tenant to “keep in good repair and condition” means you may be responsible not only for maintaining the property but also for putting it into repair if it’s already in disrepair. This could include costly works such as replacing a boiler or repairing a roof, potentially exceeding the annual rent. If these obligations aren’t limited, tenants may find themselves liable for pre-existing issues.
Clarifying the extent of works
The lease should clearly define the property and the extent of the tenant’s responsibilities. This includes whether shared walls, ceilings, or structural elements fall within your remit. For example, in a retail unit, you may want control over the shop front and fascia but not be responsible for external structural repairs. Ambiguities in the lease can lead to disputes, so clarity is key.
Defects in new buildings
Inherent defects are issues arising from the original design or construction of the building and they can be particularly problematic. If such a defect causes damage, tenants are often required to repair it unless the lease specifically excludes this liability. If the repairing covenant is to “keep in repair”, the tenant takes the risk that they will be responsible for remedial works to correct inherent defects.
We strongly recommend negotiating to ensure the landlord remains responsible for latent defects, especially in newly built properties.
Damage from Insured Risks
Typically, tenants are not responsible for damage caused by insured risks. However, if damage results from an act or omission by the tenant or someone acting on their behalf, the responsibility may fall to the tenant. This distinction should be clearly set out in the lease.
Protecting yourself with a Schedule of Condition
To limit your repairing obligations, we often advise tenants to include a schedule of condition, a photographic record of the property’s state at the start of the lease. This ensures your obligation is to maintain the property in its existing condition, rather than improve it. Other protective measures include excluding liability for structural or external elements and negotiating a cap on major capital expenditure.
End-of-Lease considerations
At the end of the lease, tenants may face a schedule of dilapidations if the property isn’t returned in the agreed condition. This can lead to costly claims and may even affect your ability to renew the lease. Ensuring compliance with your repairing obligations throughout the term is essential to avoid these issues.
Final Thoughts
A thorough inspection and professional survey should be carried out before committing to any lease. By instructing our commercial property team, we’ll help you understand the full extent of your repairing obligations, identify potential risks, and negotiate terms that protect your interests. We’ll also review the landlord’s services to ensure there are no overlaps or gaps in responsibility.
If you’re considering a new commercial lease and want to ensure your obligations are clear and manageable, please contact Diane Hall at diane.hall@swinburnemaddison.co.uk or call 0191 384 2441 to speak with a member of our commercial property team.
For more information, please contact...
Diane Hall
Managing Associate
Diane Hall is a Managing Associate in Swinburne Maddison’s Commercial Property team, having joined the firm in November 2022. She was promoted to Managing…
