Beware of Repairs

23-03-2022


Leases will almost always contain provisions that state who is responsible for keeping the property in a specified state of repair. In leases for commercial premises, it is not unusual for a tenant to have responsibility for the repair of the whole property and therefore have to carry out any repairs at their own expense.

Where the lease is of part of a building, like a certain floor of an office block, then a full repairing lease of part will mean the tenant is responsible for the interior parts – which can include plaster on the walls and ceilings, floor coverings and windows and doors – whilst the landlord will usually arrange repairs of common areas, with the tenant still responsible to pay these cosst via service charge. If the lease is for the whole of the building, a full repairing will mean the tenant is responsible for the whole structure including foundations and roof.

In Repair

Whether any works fall within the repairing covenant is usually a question of fact but the tenant shouldn’t be required to return the property in a ‘wholly different’ form than it took on at the start of the lease. Despite this, some leases will contain an obligation to keep the property ‘in repair’ and this could mean the tenant has to put the property into a state of repair even if it is in a state of disrepair at the start of the lease. This is because a tenant cannot keep the property in repair, if it is not already in the required level of repair. Whether the obligation is to keep the property in good repair or substantial repair, case law has illustrated that these have very little effect in practice and will not increase the responsibility on the tenant.

It is important to consider the age of the property at the date the lease was granted when considering what works the tenant has to carry out as for example, a clause requiring the tenant to keep an old building in repair will not give them any requirement to modernise it.

Repair and Condition

On the contrary, some leases might refer to keeping the property in a good or substantial state of ‘repair and condition’ which will be slightly more onerous on the tenant and could require the tenant to carry out works (even when the property is not in a state of disrepair) to keep the property in a condition a tenant would reasonably require. This obligation will vary depending on the length of the term, the location and age of property and the nature of the tenant.

Renew

If a tenant covenants to ‘renew’ the property, this will extend their repair obligations dramatically as it would mean they could have to rebuild the whole property if that became necessary.

In addition to any requirement to keep the property in a specified state of repair, there will likely be a clause to ensure any mechanical and plant machinery are in a functioning state/good working order. This will include things like heating and air con. Case law has showed a covenant to keep plant in good and substantial repair and condition was satisfied by a system in good working order. However, if any machinery then breaks, it can be costly on the tenant to replace.

A tenant of commercial premises may look to limit its repair obligation by amending lease provisions so that it only has to keep the premises in the same state and condition they were in at the start of the lease. This will require a schedule of condition to be agreed by both parties so that there is some evidence of that state.

However, because a schedule of condition has limited the tenants repairing obligation, it will not necessarily be the case that the landlord is responsible for carrying out the excluded works. If the landlord does not have this obligation then the tenant will either have to put up with the defects for the duration of the lease or carry out the repairs themselves.

It is in the landlord’s best interests to keep the property in a good state of repair and so if a tenant fails to fulfil their repair obligations then there are several options available to the landlord to ensure the necessary works are carried out or to potentially evict the tenant. A lease might contain a ‘self-help’ provision which allows the landlord to serve notice on the tenant giving them a time frame to carry out the required work and if they fail to do so, the landlord can enter the property to carry out the work and then recover this cost from the tenant.

Alternatively, a landlord could seek a court order or injunction requiring the tenant to carry out the work, claim in damages for any financial losses caused by the tenants breach of the lease or exercise their right to bring the lease to an end due to the tenants breach.

Tenant’s repairing obligations can sometimes be substantial.  For a tenant it is always worth spending that extra time at the outset to consider what your repairing obligations might be and whether this is fair in terms of the length of your lease and the state and age of the property.  It is in both parties’ interests to understand their respective obligations with regard to repair from the outset.


Karron Whitter

Partner
Commercial Property

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