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Repair clauses in commercial leases

View profile for Andrew Rannie
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There is a common misconception, amongst tenants, that the tenant is only liable to give the property back in the same condition in which it was given to them.  This is rarely, if ever, the case.  The most common position is that it is wholly the tenant’s responsibility to put and keep the property in good order from day one.  Most landlords will only be concerned about the condition at the end of the term but they can inspect part way through and insist repairs are carried out. 

This can give rise to a significant liability for the tenant, over and above the rent and other outgoings for the property.  In older buildings, repair works may arise from issues beyond the tenant’s control, such as: penetrating damp, a roof being beyond economical repair, common roads on an estate needing resurfacing.  All of these costs could come back to the tenant, however disproportionate they may seem.    

There are several ways that the tenant can reduce or limit this liability:

  1. Where a property is known to be in a poor condition before the lease starts, a tenant can try to limit their liability by having a Schedule of Condition drawn up and attached to the lease. 
  2. The tenant could accept liability for known repairs but negotiate a discount on the rent in return. 
  3. If there is a specific aspect of the property, such as a flat roof, that is causing concern, it could be excluded from the tenant’s liability. 
  4. A cap could be agreed on annual costs or total costs during the term of the lease. 

Other solutions exist but landlords will of course seek to resist any such limits and it will come down to strength of bargaining position as always.  The important thing is that the tenant goes into the deal with an eye for this potential cost and negotiates accordingly. 

If you would like further information on any commercial property related matter, please do not hesitate to contact Andrew Rannie