Repair obligations under commercial lease

This is one of the most common and important questions in commercial property law, and the answer depends heavily on the specific terms of your lease. That said, I can explain the general framework and what to watch out for.

The starting point: what does the lease say?

In a commercial lease, the repairing obligations are almost entirely governed by the terms of the lease itself. Unlike residential tenancies, there is very little statutory protection for commercial tenants when it comes to repairs. The Landlord and Tenant Act 1985, which implies certain repairing obligations on landlords, applies only to leases of less than seven years for dwellings, so it will not help you in a commercial context.

This means the lease wording is critical.

Full repairing and insuring lease (FRI):

Many commercial leases, especially for whole buildings or standalone units, are granted on a full repairing and insuring basis. Under an FRI lease, the tenant takes on responsibility for keeping the entire property in repair throughout the term, including the structure, roof, exterior, and interior. This is the most onerous form of repairing covenant for a tenant.

Internal repairing lease (IRI):

Where a tenant occupies part of a building, for example a unit in a shopping centre or an office floor, the lease may limit the tenant's direct repairing obligation to the interior of the demised premises. The landlord typically retains responsibility for the structure, common parts, and exterior, but recovers the cost of those repairs from tenants through a service charge.

Key things to consider:

1. The exact wording of the repairing covenant matters enormously. Words such as "to keep in good and substantial repair and condition" can impose an obligation not just to maintain but to improve the property to a reasonable standard, even if it was in poor condition at the start of the lease.

2. A schedule of condition agreed at the start of the lease can limit your liability. If the repairing covenant is expressly limited by reference to a schedule of condition, you are generally only required to hand back the property in no worse condition than recorded. If you do not have one, this protection does not apply.

3. The Leasehold Property (Repairs) Act 1938 provides some protection for tenants of premises where the original lease term was seven years or more and there are at least three years unexpired. Under that Act, a landlord who serves a notice under section 146 of the Law of Property Act 1925 for breach of a repairing covenant must inform the tenant of their right to serve a counter-notice, which prevents the landlord from proceeding with forfeiture or a damages claim without leave of the court.

4. At the end of the lease, the landlord may serve a terminal schedule of dilapidations claiming the cost of putting the property back into repair. Your liability under such a claim is capped by section 18(1) of the Landlord and Tenant Act 1927, which limits damages for breach of a repairing covenant to the amount by which the value of the landlord's reversion has diminished. In practice, this means the landlord cannot recover more than the reduction in the property's value caused by the disrepair.

5. There is a well-established body of case law and professional guidance on dilapidations, including the RICS Dilapidations in England and Wales guidance note, which sets out best practice and is regularly referred to in disputes and negotiations.

Practical steps:

1. Get hold of your lease and read the repairing covenant carefully, including any definitions of the demised premises and any limitations or qualifications.

2. Check whether a schedule of condition was attached at the start of the term.

3. If the landlord is demanding that you carry out repairs or has served a schedule of dilapidations, do not ignore it, but equally do not rush to agree or carry out works without first understanding the scope of your actual liability.

4. If you are approaching the end of your lease term, consider obtaining a building survey and taking early advice on likely dilapidations exposure, as this gives you time to manage or mitigate the claim.

If you can share the relevant wording from your lease, or tell me more about the specific situation, whether it is an ongoing repair dispute, a dilapidations claim, or something else, I can give you a much more targeted answer.