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As a commercial tenant, you have legal obligations within your lease agreement, which you must meet, or you may breach your lease. For example, you must ensure that you maintain and repair your commercial premises as per your lease agreement’s covenants. However, repair and maintenance obligations in commercial leases can be tricky to understand. Therefore, this article will explain to you, as a commercial tenant, what you need to know about maintenance and repairs for your commercial lease in the UK.
Lease Agreement
You and your commercial landlord will sign a lease agreement before your lease commences. This is a legally binding contract between you both for your business’ use of their property in return for rent payments.
Your commercial lease agreement will also explain your maintenance and repair obligations which can differ between commercial leases. Therefore, you must primarily look at your lease to understand your maintenance and repair obligations for your business premises. However, some essential key points apply to most commercial leases, and we explore some issues you need to know about below.
Extent of Obligations
Understanding the scope of your maintenance and repair obligations in your commercial lease is essential. This largely depends on the type of commercial property you rent from your commercial landlord.
If you rent a whole building or a stand-alone property, you may have a full repairing lease which your lease may refer to as a ‘full repairing and insuring lease’. This means you are responsible for maintaining and repairing the parts of the building your lease covers. Accordingly, this may be for the entire building and include utility units and the property structure. However, your landlord should be responsible for essential repairs such as:
- the roof;
- foundation repairs, and
- running water.
On the other hand, if your commercial property is part of a larger building, such as offices within an office block, you will likely only be responsible for internal repairs for parts of the building, which your lease covers. Your lease may refer to this as ‘internal only repair’. Therefore, your landlord will likely be responsible for the building structure and common sections such as parking areas and meeting rooms. However, they will probably pass the cost to you through a service charge.
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Standard of Repairs
Knowing the standard of repairs your commercial lease requires you to maintain is vital. If you have a full repair lease, it is likely either:
- ‘good and substantial repair’; or
- ‘good and substantial repair and condition’.
You must understand that some leases that state either of these standards will require you to bring the premises up to the state it should be at the start of your lease if it is not already in that condition. You then need to maintain it.
A flexible approach is often crucial here to interpret what is meant by ‘good and substantial repair’. Several factors are relevant, such as:
- nature of the property;
- the location of your commercial premises; and
- the age of the property.
Therefore, if your commercial premises are on a well-used, old parade of shops, you may have a good argument that you are not obliged to bring it up to the standard of a new state-of-the-art shopping centre. In any case, this depends on what your lease says and what specifically is in disrepair.
Repairs and Renewal
Regardless of what your maintenance and repair obligations are for your commercial lease, you must maintain these. Leaving your commercial premises in frequent disrepair is not only a breach of the lease but usually gives your landlord the right to carry out repairs at your cost. It is very likely also to affect whether your landlord agrees to renew your lease at the end term. As a commercial tenant running a business, your premises are crucial for success.
Schedule of Dilapidations
An important point to understand in terms of the maintenance and repairs for your commercial lease is the role of schedules of dilapidations. Schedules of dilapidations are legal documents that list your commercial premises’ disrepairs and the repairs you need to make. Your landlord may issue a schedule after they inspect the property and note any repairs you have not done but should have according to your lease.
Your commercial landlord can issue you with three different types of schedules of dilapidations which depend on the time in relation to your lease term that they give these to you. When they pass you the schedule during the tenancy term, it is an interim schedule, and it is a terminal schedule if they serve a schedule during the final three years of your lease term. Each type will detail what you must do to make the required repairs within an agreed period. For example, if you fail to repair something, the landlord will carry out the repairs at a cost to you. You are also responsible for paying the fees for their notice and supervising your repairs.
However, where you receive a schedule of dilapidations when your lease term has ended, this is a final schedule. While this will list the disrepairs, it will not list the repairs you should make. This is because it is too late to make them, and your landlord will likely pursue you for damages.
Key Takeaways
As a commercial tenant, you should know your legal obligations in your commercial lease agreement. This includes those that concern maintenance and repairs. Ultimately, your lease agreement will explain what your responsibilities are for this as a commercial tenant. If you have a full repair lease, you are responsible for internal and external repairs, which include structure. If your lease is an internal repair, you are only responsible for internal repair for the parts of the property in your lease. You should make yourself aware of the extent of your obligations and conditions of repair too. Maintenance and repair of your property could affect your lease renewal, and if your business premises are in disrepair, you could receive a notice of the schedule of dilapidations. This requires you to make repairs and can incur further costs, such as the costs of the notice.
If you need help understanding maintenance and repairs for a commercial lease in the UK, our 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 for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.
Frequently Asked Questions
A commercial lease is when a business owner leases the property from a commercial landlord as their business premises and pays rent in return.
As a commercial tenant, there are many points to consider regarding maintenance and repairs of your commercial lease, such as understanding schedules of dilapidations related to the disrepair of your commercial premises and what you need to repair.
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