Leases: Limiting your Repair Risk

Whether commercial or domestic, repair liability in leases is the biggest “unknown" and costly risk for tenants. Landlords market premises on the basis of a full repairing lease but this should not be readily accepted. Whether it is suitable depends on:

  • length of lease age/type of property
  • market conditions
  • parties’ negotiating position

Where supply is limited, a landlord will dictate terms whereas in a slow market with an oversupply the tenant can request favourable terms. A full repairing lease is referred to as an FRI lease meaning to fully repair and to pay the cost of any buildings insurance.

Tenants should be aware that the commitment to “keep the premises in repair” carries a hidden wording “to put and keep” the property in repair. This applies even if the tenant was not responsible for any disrepair and starts on day one.

But what does “repair” mean?

To repair can require renewal or replacement and, to some extent improvement. The question is a factual one and only a third party can decide this in the event of dispute. For domestic premises this is often the Tenancy Deposit Scheme and for commercial parties, a costly negotiation at the end of the lease.
Some leases extend the standard commitment by including additional wording e.g. “to keep the premises in good and substantial repair and condition”. This imposes a greater burden and should be resisted, especially when signing a short lease.

What can you do? Tenants should always seek professional advice. Time and money invested at the early stages will reap rewards both during and after the end of the term.

  • Allow specialists to negotiate
  • Inspect the property and have a survey
  • Consider the lease wording carefully
  • Ask the landlord to rectify defects
  • Exclude known defects
  • Accept only internal repairs
  • Cap Service Charges
  • Request a Schedule of Condition/Inventory
  • Allow for fair wear and tear

The simple requirement to keep the premises in good repair can bring about a variety of issues and emphasises the need to obtain proper advice. Due diligence is essential for any property acquisition whether buying or leasing.

Our expert lawyers at Terry Jones Solicitors remove the unknown risk element for your peace of mind. Please contact Ian Bowker for further information on 01952 297979.
 

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