Knowing who is responsible for repairing which part of a commercial property is important.
Not only will the landlord want to protect their investment and the value of the property, but the tenant will also need to know what their obligations are.
In his latest article, Commercial Property Solicitor Richard Ramshaw outlines ‘who is responsible for what’ in a commercial lease.
Who is responsible for repairs in a commercial lease?
Most commercial property leases are fully repairing and insuring (FRI) leases.
An FRI lease is where the tenant is responsible for the repair, maintenance and insurance of the property.
FRI leases can be used for leases of whole (for example, one unit on an industrial estate) and leases of part (for example, a ground floor shop with residential flats above).
Find out more about leases and how they work here.
What is a tenant responsible for in a lease of whole?
With a lease of whole, the tenant would be responsible for all costs in relation to the property, which includes the exterior roof, structure and also the interior of the property.
What is a tenant responsible for in a lease of part?
With a lease of part, it’s important for the definition of ‘property’ to be properly defined.
For example, they will often refer to including one half horizontally if the property being leased is situated on the ground floor. This is because the tenant of the first floor will be responsible for the remaining half which will form part of their flooring.
Does a commercial landlord have to have insurance?
Yes, in both a lease of whole and of part the landlord will insure the property and recover the sums back from the tenant.
The landlord will want to make sure the property is insured at the correct level and covers all ‘insured risks’ required for that particular property.
Who should pay building insurance on a commercial property?
Despite the landlord being responsible for the arrangement of building insurance, the tenant will usually pay for it.
This is because the tenant will have the benefit of the insurance.
What repair responsibilities do commercial tenants have?
For the lease of whole, the tenant is responsible for all repairs.
The repairing obligations will either be:
- to keep the property in ‘good (and substantial) repair and condition’ or
- in the same state of repair as set out in the schedule of condition.
As a tenant, it’s important to obtain a survey of the property before completing the lease so you know what you’re getting yourself into.
What repair responsibilities do commercial landlords have?
For the lease of part, repair responsibilities will be shared.
The landlord will be responsible for the exterior structure, services and common parts. The tenant will be responsible for the interior property.
What other responsibilities could tenants have in commercial property?
There are other responsibilities that the tenant may have however, these will be specific to each property.
Tenant obligations depend on the type of property being leased (for example, a unit on an industrial estate vs. a high street shop), but, usually, other responsibilities will include:
- Keeping the property clean and tidy
- Ensuring no rubbish is left outside
- Making sure that the property isn’t overloaded with heavy machinery
- Keeping any accessways clear
Related: How to negotiate a commercial lease and its terms with your landlord
Who is responsible for decorating commercial property?
As well as the above, there will also be specific obligations on the tenant to decorate the property.
Again, these will be different depending on the type of property and the permitted use – for example, there may be specific requirements to decorate a shopfront which will not be required for offices.
The landlord will want to keep the property well maintained and the easiest way of doing this is for the tenant to keep on top of their repairs and decoration.
At the end of the term, the property will be ready to use for the next tenant which is why there are obligations in the lease for the tenant to decorate the property in the last 3-6 months of the term to the satisfaction of the landlord.
If you or your tenant have reached the end of the lease term, you can read our guidance on renewing a commercial lease here; or you can read our guide to selling a commercial property here.
Can a landlord inspect repairs?
Yes - the landlord can enter the property to inspect the state of repair and condition.
Most leases allow the landlord to serve notice on the tenant to rectify any disrepair. If the tenant doesn’t do this within a reasonable time, the landlord can carry out those works and recover the sums back from the tenant.
At the end of the term, the landlord can prepare a schedule of dilapidations which sets out any disrepair.
How do you resolve a commercial property dispute?
The starting point is always to check lease and see who is responsible for what. My advice would be to speak to a solicitor to review the lease and let you know your options – whether that means discussing the issue with the landlord or resolving it yourself.
If you’re struggling with a dispute with your landlord or tenant, you can read our article on ending your lease early here.
Specialist Commercial Property Solicitors
If you’re unsure on your responsibilities, please contact a member of our bright Commercial Property Team who would be happy to help you.
It is always beneficial to seek legal advice from the outset before committing to the lease. Call us on 01202 499255 or fill in the form at the top of this page for a free initial chat.
If things between you and your landlord/tenant have escalated, you can get in touch with our Dispute Resolution Team for tailored advice.
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