Repairing Clauses are a crucial legal issue in leases of commercial property. Landlords will want to know that their property is being well maintained during the term of the Lease so that it does not depreciate in value.
Tenants will also want to understand the repairing costs they may have to incur throughout the term of the Lease, and what their obligations are when returning the Property to the Landlord at the end of the term (or on opting to ‘Break’ the Lease) .
There is a great deal of case law touching on the meaning of repairing covenants in Leases and although these provide useful guidance, each Lease must be considered on its own merits. Generally, repair can only be carried out where there is disrepair to begin with. An obligation to repair does not generally include an obligation to improve.
Commonly, however, many repairing clauses require a Tenant to ‘keep’ a property in repair. This means the Tenant must also put any parts of a property which are in disrepair, into repair and then keep them in a standard of repair. A Tenant’s obligation to repair can also require it to repair a property when disrepair is caused by an inherent defect in the Landlord’s property – for example a defect in the underlying construction of a building.
For this reason, Tenants may wish to limit their repairing obligations. This can be done by the Landlord and Tenant agreeing a schedule of photographs of the property to be annexed to the Lease. The Lease will then state that a Tenant must repair, but is not obliged to put a property into a better state than shown in those photos. This limitation may also be in the interests of a Landlord. If the Tenant’s repairing obligations in a Lease are particularly onerous it may be more difficult for rent to be reviewed upwards in line with market rent. Tenants may also wish to negotiate a term in the Lease excluding their liability to carry out repairs where the disrepair is caused by inherent flaws in the design and structure of the building. Where a Tenant is taking on a long Lease, at a significant level of rent, they should consider obtaining a structural survey prior to completion of the Lease.
Landlords and Tenants should also carefully consider how the property being let to the Tenant is defined in the Lease. The Tenant will usually be required to repair those parts which are included in the definition of the Property, with the Landlord taking responsibility for those parts excluded from the definition. A Lease of a whole property may quite simply define a property as the land and buildings falling within a particular area on a plan. This results in a Full Repairing Lease where a Tenant is responsible for all repairs.
However, the situation is more complex where a Tenant is being granted a Lease of part of a property, particularly where other parts of the Building are occupied by other tenants. In this instance, a properly drafted Lease will set out who is responsible for items such as floors, ceilings, plaster, doors and windows, fixtures, and services (pipes/ wires, drains etc.). A Tenant will want to see that a Landlord can be held responsible for maintaining the structure, foundations and roof so the Tenant’s ability to trade from the Property is not put at risk and they do not have to incur significant costs. Landlords and Tenants should also pay close attention to who is responsible for insuring a property, and which parts, and ensuring that that person agrees to reinstate a property when damage is caused by an insured risk.
The Commercial Property team at Else can assist Landlords and Tenants negotiate the complex issues surrounding repairs in Leases. This includes acting for both Landlords and Tenants in agreeing new Leases and negotiating repairing clauses. We can also advise on how existing Leases should be interpreted, where the obligation for repair falls, and what a Tenant’s obligations are before it returns a property to the Landlord at the end of the lease term.
For more information or to discuss legal issues regarding your leases, contact Caroline Major on Caroline.Major@elselaw.co.uk or call 01283 526 200