Beware of your repairs!

When a commercial property lease is granted, a landlord will want the tenant to take on the responsibility of repairs – a task that can be done in various ways.  

If an entire building is being let then the lease will usually specify that the tenant must keep the whole property in good repair and condition.  If the property is a small office or forms part of a larger building then the repairing covenant is usually limited to the interior only, with the landlord being responsible for structural and external repairs, and decoration. In this case the landlord would charge the tenant a proportion of the costs of carrying out those repairs through a service charge.

It is extremely important that the tenant understands the practical and legal consequences of their repairing covenant. Before the lease is signed, the tenant should inspect the property to check the condition and should seek the advice of a surveyor. Proceeding regardless, without legal advice and paying little attention to the wording of the repairing covenant in the lease, may well end up with the tenant in a rather onerous position further down the line.

As you might expect with any legal document, the wording of the repairing covenant is important.  Case law has set precedent here, so it is important to note that when the repairing covenant says “to keep in good repair” this also means “to put” into good repair. In other words, if the property to be let is in a poor state of repair when the lease is granted, then the tenant must put it into a proper state of repair; an obligation that could be very costly.

So the best advice to a tenant is to inspect and survey the property, take the advice of a surveyor in respect not only of its conditions but also of the consequences and costs of any repairs that may be needed to bring the property - or the building if there’s a service charge - up to a standard required by the lease.

In addition, the tenant should seek legal advice in respect of the wording of the repairing covenant itself and perhaps consider seeking to limit its affect by referring to a schedule of condition. Such a schedule can usefully record the condition of the property and be annexed to the lease as evidence of its condition. The repairing covenant can then be amended to limit a tenant’s repairing covenant, so that the tenant still has to keep the property in good repair but in no better condition than is evidenced by the schedule of condition. This will make the repairing covenant less onerous and ultimately mean that the tenant does his best to avoid being left with a large dilapidations claim when the lease ends. Limitations in the service charge clauses may also be needed. 

If you are about to sign a commercial property lease or need advice on aspects such as repairing covenants, please contact Daniel Sturman.