22 Aug 23 by Alice Kodritsch
In commercial leases, the repairing leases obligation is generally either ‘full repairing’, where the tenant has responsibility for all external and internal maintenance, decorations and repairs, or ‘internal repairing’, where the tenant will have a more limited liability for maintenance, decorations and repairs confined to the internal parts of their demise. In practice, we often see the use of ‘effective full repairing’ liability where the Tenant is responsible for the cost of repairs which can be collected through a service charge allowing the Landlord to actually undertake the repairs to the property.
We were recently instructed to act on behalf of a Landlord in the lease renewal of their office premises where the main topic of negotiation related to the repair liability. The property comprised of a Grade II Listed single storey office building of circa 2,400 sq. Ft with basement extending to over 2,500 sq. Ft. The property was situated within the Millfields, a former Royal Navy hospital dating back to 1760 located to the west of Plymouth City Centre.
The original lease imposed full repairing liability on the tenant. Due to the nature of the property’s age and construction, the tenant had been struggling to comply with their repair and maintenance obligations over the term of their lease. The Landlord was a builder by trade and expressed a desire to take on the liability for repairing the property with the ability to recover costs from the tenant.
The rent for the renewal lease needed to reflect the Market Rent of the property while also considering the reduced repairing liability for which a premium would be paid to contribute towards the Landlord’s maintenance costs. We had regard to comparable evidence of lettings on internal repairing terms to assist in determining an appropriate rent for this renewal.
While there is no requirement to accept substantial changes to lease terms at renewal, the proposal in this instance provided benefits to both parties. The Landlord was in a better position to ensure the property was adequately repaired and maintained which, in turn, protects their investment. Subsequently, the tenant was relieved of managing the external repairs for a typically higher maintenance property. While the agreed rent at renewal was higher to reflect the reduced repairing liability, the rent also affords clarity for the tenant in relation to their finances. Rather than managing large unforeseen costs, a fixed rent level provides more financial security as an occupier.
We have a knowledgeable and experienced lease advisory team that would be delighted to assist you with commercial Market Rents or Lease Renewals across the Southwest.