Repair obligations in a commercial lease

If you are a tenant entering into a new lease of commercial premise it is important that you understand what you are agreeing to with regards to repairs. An onerous repairing obligation could result in you being responsible for costly repairs during the term of your lease or upon its expiry which is far from desirable.

What is the extent of my repairing obligation?

It is common practice for Landlords to include such terms in leases which requires you as a tenant to keep the property “in repair”, which isn’t unreasonable considering you are occupying and using the premises and so you should be responsible for keeping it in repair.

However an obligation to keep the property in repair will mean that you must in addition “put” the property into repair. The consequence of this is that if you take on a run-down property, you will be responsible on expiry of the lease for not only reinstating it to the standard in which you entered the property but to full repair – basically tip top condition.

This places the Landlord in a very favourable position, in that it could mean on the expiry of your lease you would be required to return the property to them in a better state and condition than it was at the start of your lease, and at no cost to them.  

If you intend to take a property that is in a poor condition you should consider agreeing a schedule of condition with the Landlord prior to the lease being entered into, which would limit the extent of your repairing obligation.

What about liability arising through inherent defects?

If you are thinking about taking a lease of a new or recently constructed building then you must consider responsibility for damage caused by inherent defects in the building.

An inherent defect is a defect in the construction or design of a building that is not immediately visible on inspection.

Where you become liable to repair damage caused by inherent defects, you will face difficulties in recovering any expenditure incurred in remedial works from the building contractor or members of the design team who caused the defect, this is because you have no contract with them.

It would be advisable to exclude liability for damage caused by inherent defects from your repairing obligation or as an alternative, enquire about the availability of contractual warranties from the construction and design team.

What about the effect of other clauses?

Even if you are not liable through your repair obligations for dilapidations or inherent defects, you may be indirectly liable for repairing these through service charge provisions contained in the lease.

As can be seen from the above it is important that you carefully consider your repairing obligations in your lease and that any limitations of liability are duly negotiated prior to entering into a formal agreement.

At Goughs we can help both landlords and tenants at all stages of a lease transaction whether that’s with the drafting and negotiation of the lease or registration. For more information or assistance with a commercial lease please then please contact a member of our Commercial Property Team today