Commercial Property – Repair Clauses in Commercial Leases

Commercial Property – Repair Clauses in Commercial Leases

Responsibility for repairs is a common source of dispute between landlords and tenants. The repairing obligations will be set out in the lease. In the case of a long lease of a whole building, it is usual for the tenant to be responsible for the full building repairs. In the case of a unit that is part of a larger building there will usually be a management scheme for repairing the common parts and the structure with the tenant being responsible for internal repairs and also a contribution to the service charges to meet the costs of repairs. With short term leases it is generally the case that the majority of the repairs will be the responsibility of the landlord. Often in short term lettings the repair clause could be reduced to internal repairs only with further reduction for wear and tear..

Definition of “Repairs”

The correct wording of the repairs clause is extremely important as it will set out the extent of the repairs which must be carried out in order to conform with the obligation “to repair”.  A tenant will need to ensure that the correct wording is used so that it is only necessary to carry our repairs to restore the premises to the same condition the premises was in when the tenant took occupation.

However, authorities have found that certain repair clauses can include the responsibility to restore / renew or replace. In this regard, it is maintained that including a term such as ‘keeping the building in repair’ can involve a duty to put a property into repair even if the property was in a poor state at the time of granting the lease.

A prime example of this is the case of a newly built property.  A tenant’s repairing covenant could  apply even if the required works are due to defects in the building and therefore they could be liable to repair same. For this reason, we would strongly recommend that tenant insist upon guarantees and warranties from the building contractors and designers to cover such eventualities or that the repair clause is at the very least amended to remove their repairing obligations in respect of inherent latent or construction defects in the property.

An onerous repairs clause could result in a landlord serving a “Schedule of Dilapidations” requiring detailed repair and upgrade works. The repairs clause would usually state that if the tenant fails to undertake the works within a certain time limits, the landlord may enter the property to do the works and recover the costs. A Schedule of Dilapidations can prove expensive and onerous for a tenant. In the case of a lease of a second hand building, we would strongly advise tenants to seek to have a schedule of condition incorporated so as to limit their repairing obligation to take account of the pre-existing state of repair of the building at the start of the lease.

Ultimately, where a dispute arises it will fall to the courts to decide on the intentions of the parties in any given case. Consequently, it is recommended that the lease should clearly reflect the extent of the obligations envisaged by the parties to the lease when drafting the repairs clause.

(c) Cosgrove Gaynard Solicitors. All rights reserved.

 

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