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When you enter a commercial lease on a commercial property, you will have repair and maintenance obligations. These can vary between leases. However, most commercial leases are full-repairing and Insuring commercial leases (FRI Leases). A FRI commercial lease can benefit both a commercial landlord and a tenant. For the latter, as their property is their investment, it helps retain the value. As a commercial tenant, you can rest assured that your commercial premises are insured and in good repair while you do your business. This article will explain three key points you need to know about a full repairing and insuring commercial lease, such as what to look out for in the lease terms.
FRI Lease Key Points
A complete Full Repair and Insuring commercial lease (FRI lease) is where the landlord passes the repair, maintenance, and insurance costs to the commercial tenant and the responsibility for carrying out repairs.
Below are three key points to help you understand a full repairing and insuring lease.
1. Tenant Maintenance Responsibilities
While a FRI lease is one where you, as the commercial tenant, have liability and cost responsibility for repairs and insurance for the business premises, the landlord still has some duties. You are responsible for repairing the part of the premises demised to you in your lease. The landlord will have to repair areas of the property, not demised to you in your commercial lease, such as if you rent part of the property.
This can include:
- structure;
- external parts; and
- car parking areas.
Your landlord must also arrange the insurance, even though you pay for it. They may charge you insurance rent to recover this.
Therefore, the lease agreement must clarify each party’s responsibilities. Otherwise, there is potential for disagreement. Also, as a commercial tenant, you will want to be sure you can meet the costs of your responsibilities before you enter the lease, and you should get legal advice about this.
Continue reading this article below the form2. FRI Lease Insurance
As established, you are responsible for paying insurance for your commercial lease, but your landlord must arrange it.
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However, you should note some other key points about insurance in a full repairing and insuring lease. These are as follows:
- where insurance covers the repairs needed for damage to your commercial premises, you do not need to fix them;
- there are some repairs insurance will not cover, so your lease agreement may say how the landlord will share the cost of these; and
- where a lease agreement does not specify repairs not covered by insurance, you, as the tenant, are responsible.
3. Repair Standard
Whilst you, as a tenant, are responsible for the costs of repairs in your commercial lease, you need to know the standard of repair your landlord expects. This will generally be a ‘good and substantial repair and condition ‘or ‘good and substantial repair’.
If you fail to do this, you could find that at the end of a full repairing and insuring lease, you could receive a bill for what you did not bring to the standard the landlord requires as a breach of the lease even though you did not carry out the damage.
However, defects are often not included as something you need to repair, but you should clarify this in the lease agreement.
A good and substantial repair standard will be a personal one to the lease and depends on many factors of the commercial premises. However, where the standard of repair refers to ‘condition’, your repair standard is higher. This means that if, for example, condensation creates damage to the business premises, you may need to repair it.
Key Takeaways
Most commercial leases are FRI leases. You need to comprehend what things you are responsible for maintaining and repairing, which will usually be the area demised to you in the lease. You should also understand the standard of repairs your landlord requires and points about insurance.
If you need help understanding FRI leases, LegalVision’s experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today on 0808 196 8584 or visit our membership page.
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