Your commercial tenancy agreement (lease) usually sets out who is responsible for repairs, maintenance and insurance of your premises and any larger building in which it is located. There are two main types of arrangements with different repairing obligations for you and your landlord, which are a full repairing and insuring lease and an internal repairing lease.
This guide sets out the differences between a full repairing and insuring lease (FRI lease) and an internal repairing lease and provides guidance on repairing obligations for tenanted premises in general.
Contents
- Full repairing and insuring lease (FRI lease)
- What is an FRI lease or full repairing and insuring lease?
- Do I actually undertake repairs, and take out insurance myself, under an FRI lease?
- Does my landlord have to find the lowest insurance premiums under a full repairing and insuring lease?
- What if something in the premises needed repair before I took on an FRI lease?
- Internal repairing lease (IRL)
- Standards of repair for business premises
- Who is responsible for repairs and maintenance if my tenancy agreement does not say?
- What standard of repair do I need to maintain in my business premises (under a full repairing and insuring lease or an internal repairing lease)?
- Do I have to repair damage promptly?
- What can my landlord do if I do not keep my premises in repair?
- Consequences of landlord failing to repair
- Can I require my landlord to repair my business premises?
- What can I do if my landlord does not do repairs when they are supposed to?
- Can I withhold rent if my landlord refuses to do repairs?
- Can I claim compensation for any losses caused by my landlord’s failure to repair?
- Can I end the tenancy and leave if my landlord refuses to do repairs?
Full repairing and insuring lease (FRI lease)
What is an FRI lease or full repairing and insuring lease?
A full repairing and insuring lease (also called an FRI lease or FRI tenancy) fixes the tenant with responsibility for paying to repair and insure some, or all, of the structural parts of the building as well as the interior of the premises actually being rented. For example, a top floor tenant might be obliged to pay for roof repairs. These types of tenancy agreements may also be called ‘clear leases’ because the landlord gets the rent clear of the costs of looking after the building and insuring it.
Do I actually undertake repairs, and take out insurance myself, under an FRI lease?
Under a full repairing and insuring lease, a tenant will often repair the interior while the landlord repairs the external structures and takes out insurance for the premises. The tenant then reimburses the landlord for those costs. You are more likely to have a full repairing and insuring lease if you rent a whole building, unless you are only renting it for a very short time. In a multi-let property, a landlord will often conduct repairs to common areas themselves and recover costs through service charges.
No, your landlord does not have to find the lowest insurance premiums, and is usually allowed to choose any insurance company they wish (provided the insurance company is of good repute).
What if something in the premises needed repair before I took on an FRI lease?
Before taking on an FRI lease you should inspect the property to check what repairs may be needed. You may need to engage a building surveyor to help you assess potential repair costs and agree the terms of repair with your landlord. Otherwise, you could face unexpected costs at the end of your tenancy. It is best to seek legal advice to ensure that the lease is clear at the outset in terms of what repairs you are responsible for, and potential costs. For access to a specialist lawyer, you can use our Ask a Lawyer service.
Internal repairing lease (IRL)
What is an internal repairing lease or IRL?
This is where your tenancy agreement requires you to keep the interior of the premises in repair. Precise details can vary, but it usually makes you responsible for maintaining the internal finishes of the premises (eg plaster, flooring etc) and fixtures and fittings, with your landlord being responsible for the exterior and structure of the whole building (eg roof, gutters, foundations, joists etc). You will normally have to pay a service charge to cover your share of the cost of any repairs your landlord carries out.
You are likely to have an IRL if you rent a commercial unit in a larger building with multiple tenants, such as a floor of offices in a block or a retail unit in a shopping centre, or if you are renting only for a short period.
Standards of repair for business premises
Who is responsible for repairs and maintenance if my tenancy agreement does not say?
It is very rare for a tenancy agreement not to say anything about repairs. However, if it doesn’t, then neither you nor your landlord are legally obliged to fix your premises – unless your tenancy requires you to pay your landlord a general regular fee which covers repairs (in which case your landlord must make the repairs).
What standard of repair do I need to maintain in my business premises (under a full repairing and insuring lease or an internal repairing lease)?
The standards you must maintain in your business premises are dependent on what your tenancy agreement says you must do (whether it is a full repairing and insuring lease, an internal repairing lease or something else). If you do not carry out repairs in accordance with what your tenancy agreement requires, your landlord may be able to bring your tenancy to an end, refuse to renew it (see Renewing or extending any business tenancy), or claim compensation from you.
The standard of repair required by most tenancy agreements falls into one of two broad categories obliging you either to simply fix any problems that crop up during your tenancy, or requiring you to go further than maintain what was there and improve the premises.
A simple obligation to repair as you go is most commonly indicated by phrases like ‘good repair’, ‘tenantable repair’, or ‘maintain the premises’, although the precise wording of your tenancy agreement may be different. Your tenancy agreement may exempt fair wear and tear. However, if it does not, you may find that even damage caused simply by normal usage will have to be repaired, such as scuffs on external steps or doors.
A more involved obligation to actually improve the premises could be indicated by phrases like ‘modernise’, ‘improve’ or ‘renew’.
Do I have to repair damage promptly?
Yes, if it is damage to something that your tenancy agreement says you are responsible for. You must fix any problems when they arise – you cannot simply wait until the end of your tenancy and deal with everything at once before handing the property back to your landlord.
What can my landlord do if I do not keep my premises in repair?
If you fail to repair your business premises to the standard that your tenancy agreement requires, your landlord may take action. Their exact options will vary depending on the type of tenancy you have and the extent of the required repairs, but they could:
- do the repairs themselves and claim the costs from you (if your tenancy agreement allows it);
- forfeit (ie end) your tenancy (for more information, see Landlord ending a tenancy);
- refuse to grant you a new business tenancy if it comes up for renewal (for more information, see Renewing or extending any business tenancy);
- claim compensation from you once the tenancy agreement has ended; or
- as a last resort, bring a court case against you to force you to perform the repairs properly.
As part of any of these, your landlord may also be able to reclaim their administrative costs from you (eg the costs of preparing a schedule of repairs, or their lawyers’ fees) if your tenancy agreement allows this.
Consequences of landlord failing to repair
Can I require my landlord to repair my business premises?
Usually only if your tenancy agreement says something is their responsibility and not yours.
Your landlord is responsible for whatever your tenancy agreement says they must do (which can vary depending on whether you have a full repairing and insuring lease or an internal repairing lease).
If your tenancy agreement does not say that your landlord is responsible for any repairs, they are not usually legally obliged to do anything, unless the tenancy agreement does not make business sense otherwise.
Pay close attention to whether it is your landlord or a management company who is responsible for making the repairs. If it is a management company, your landlord is not obliged to do anything which the company fails to do.
What can I do if my landlord does not do repairs when they are supposed to?
If your landlord is responsible for repairing your business premises, then you should tell them promptly if you discover something in need of repair that falls within their responsibilities. Give them notice in writing (by email is fine, unless your tenancy agreement specifically requires you to write a letter) so you have a record that you have notified them. Even if the disrepair is in an area controlled by your landlord (eg the lobby or in a communal lift), or the need for repairs is otherwise obvious, it is still best to notify your landlord as soon as you discover it.
Once you have told your landlord about any repairs for which they are responsible, the landlord must carry them out to a good standard and make good any damage to the decoration of the premises caused by their repair works.
If your landlord does not repair the premises promptly, or repairs them poorly, write to them to make sure that they are aware and to give them the opportunity to correct matters. If your landlord proves difficult, see below for your options to escalate matters.
Can I withhold rent if my landlord refuses to do repairs?
In most cases, you will be breaching your tenancy agreement if you withhold rent to try to force your landlord to carry out repairs that are their responsibility.
Check your tenancy agreement – it is normal to include a provision to stop you withholding rent. Most commonly, your tenancy agreement might say that you have to pay your rent ‘without deduction or set-off’. If it does, you will not be able to legally withhold rent.
If your tenancy agreement does not say anything like this, you may be able to withhold rent to cover the cost of any repairs that you have done yourself which were your landlord’s responsibility but which they have failed to do, and/or any losses to your business caused by the failure to repair (eg the value of stock damaged by a leak after the landlord should have repaired it). This is known as set-off.
If you do withhold rent in circumstances where you are not entitled to, you will be in breach of the terms of your tenancy agreement and your landlord is likely to take action against you to force you to pay, or to end your tenancy (eg by forfeiture).
Can I claim compensation for any losses caused by my landlord’s failure to repair?
Yes. If your landlord has failed to perform their repairing obligations under your tenancy agreement, you are entitled to compensation for your losses and any expenses you have had to incur as a result.
Bear in mind that you are under a duty to try and keep your losses to a minimum where possible. For example, if the problem is a leak causing damp in your premises, move stock away from the damp area to avoid it being damaged, or do the repair work yourself if you can afford to and claim back the cost from your landlord.
Instruct a lawyer if your landlord does not offer you a satisfactory sum and you wish to pursue a claim for compensation through the courts. For access to a specialist lawyer in a few simple steps, you can use our Ask a Lawyer service.
Can I end the tenancy and leave if my landlord refuses to do repairs?
It will depend on the terms of your tenancy agreement as to whether this is an option for you. See Tenant ending a tenancy for guidance on when it might be possible to end your tenancy because of your landlord’s breach.
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Marion joined Sparqa Legal as a Senior Legal Editor in 2018. She previously worked as a corporate/commercial lawyer for five years at one of New Zealand’s leading law firms, Kensington Swan (now Dentons Kensington Swan), and as an in-house legal consultant for a UK tech company. Marion regularly writes for Sparqa’s blog, contributing across its commercial, IP and health and safety law content.