When entering into a commercial lease one of the key considerations for both landlords and tenants is understanding their respective obligations regarding repairs and maintenance. Repair obligations can often become a point of dispute if not clearly defined in the lease, as well as a source of significant financial liability.
What does ‘Repair’ mean?
Repair can mean both routine maintenance and more substantial repairs necessary to keep the property functional and safe. This may be for all of the property, including structural parts. In other cases, it may be that the landlord is responsible for structural parts and the tenant for non-structural parts. The landlord may recover the cost of the repair from the tenant(s) through a service charge. Each case will turn on its own facts.
Before taking a lease, the tenant should inspect the property for disrepair and assess any potential repair costs, either to be paid directly by them, or indirectly through a service charge.
Many leases require the tenant to keep the property in “good repair”, “good and tenantable repair” or “substantial repair”. It can be difficult to say what “good repair” means as there is no one standard that can be applied to all commercial properties. Records from decided cases show us that in understanding what “good repair” practically means you must ask what a reasonably minded hypothetical tenant would consider this to mean having regard to the age, character, and locality of the property. A property on Regent Street in London may therefore be subject to a much higher standard than an industrial unit elsewhere in the country.
Limiting repair liability
An obligation to put and keep the property in repair can require the tenant to bring up the condition, even if it was in poor condition on day one of the tenancy. A tenant may wish to limit its repairing obligation to keeping the property in the same state it was on day one.
If the parties agree to limit the tenant’s repairing obligation in this way, they should prepare a schedule of condition to show the state of the property at the date of the grant of the lease. This should include photographs and a detailed description of the condition of the property and should be signed by the parties to the lease. It is essential that the schedule of condition is contained with the lease and the repair obligation wording is specifically altered to reflect this agreement.
This is not intended to be a comprehensive overview of the way in which a repair obligation operates. Other factors that may need to be considered include (without limitation) inherent defects, insured risks, uninsured risks, obligations to improve the property and compensation for improvements.
How can we help?
Our expert commercial property team can review your lease, advise on liabilities and how best to protect your position as either a tenant or landlord. You can contact us at info@mdlaw.co.uk, call 0114 299 4890 or book a free consultation appointment.
