Commercial tenants are warned of huge potential costs resulting from onerous repairing obligations contained in commercial leases. It is important for tenants to understand exactly what they are agreeing to and here we give an overview of the potential liability arising from the obligations.
Commonly, commercial tenants will covenant to keep the property “in repair”. Tenants wrongly assume that this means they simply have to return the property to the state in which they found it. However, an obligation to keep the property in repair brings with it an implied obligation to put the property in repair. If, for example, a tenant takes on a dilapidated property for a lengthy term, they will be liable for reinstating the property on expiry of the lease, not only to the standard in which they entered the property, but to full repair. This could lead to colossal cost implications and a nasty surprise at the end of the lease.
Tenants should also watch out for liability arising through inherent defects. An inherent defect is one that is as a result of a defect in the construction or design of a building which existed when the building was constructed but not clear on inspection. If the inherent defect causes damage to the property during the tenancy, under a repairing covenant the tenant may be required to repair the damage. Inherent defects may be of particular concern in new builds, where problems of poor workmanship or materials have yet to be exposed.
Even if commercial tenants are not liable through any repair obligations, they may be indirectly liable for repairs through service charge provisions contained in the lease.
It is therefore important that the repairing obligations of commercial leases are carefully considered and any limitations of liability duly negotiated prior to entering into any lease. If the property is in poor condition, the landlord may agree to limit the repair obligations according to the state of the property at the beginning of the tenancy.
If you would like to discuss any of the issues contained in this article, or you are in need of legal services with regard to a commercial lease, please contact our business services solicitors who will be delighted to help.