Full Repair and Insure leases - what you need to know
Fri 13 October 2023
Full Repairing and Insuring Lease Solicitors
From a Landlord’s perspective, requiring a new tenant to take a commercial premises lease on a full repair and insuring (“FRI”) basis is usually the preferred option. Whether a tenant should or will accept is generally a matter strongly linked to the overall bargaining position between the parties, the length of the lease term (with longer leases the Landlord is likely to insist more) and how badly the tenant wants or needs the premises in question.
If you need legal advice on a full repair and insure lease, please do get in contact. We have a large number of specialist commercial property lawyers in many locations in England & Wales.
The risks to a tenant of agreeing an FRI lease
The key and overriding risk is that the tenant will be taking on obligations to actually improve the condition of the premises. This does not just include items such as carpets, painting and windows, it will extend to things such as gas, water, electricity, heating and air conditioning, all of which can be very expensive. Where the lease is of an entire building, the full repair obligation will include structural condition (roof, windows and many other areas).
Tips for tenants offered an FRI lease
The starting point is recognising that everything is negotiable. If the Landlord won’t budge on the principle that the lease must be full repair, options include :-
- Insisting that full repair relates to internal areas only - so, instead of an FRI lease, you agree an Internal Repairing Lease (“IRL”).
- Insisting on a full and detailed schedule of condition, agreed, at the time of the lease.
- Requiring a letter of comfort - often with very long leases, such as 10 years, the Landlord will anticipate that the original tenant may move out during the term and assign (transfer) the lease to a replacement tenant. The Landlord will want the lease the replacement tenant enters into to be in it’s favour. A side letter or comfort letter may be possible whereby the Landlord waters down the meaning and liability of full repair, for the benefit of that tenant only.
- Negotiate a maximum cap on overall liability.
- Negotiate over the wording of the repair covenants - there are very important differences, for example, between keeping in repair or putting into repair. The differences between just a few words make a very big difference.
- Consider a break clause – the option to terminate the lease early, typically half way through. This is potentially problematic though as the landlord will still insist you make good and break clauses almost always require full compliance by the tenant for the clause to become operative.
How we can help
We act for both Landlords and Tenants. For tenants, we will ensure that the Landlord and/or it’s agents or lawyers do not bully you into accepting that an FRI lease is completely standard. Based upon instructions and your negotiating position, we will ensure your position is protected as strongly as possible. Importantly, we will ensure you fully understand the possible risks and costs before you sign any lease agreement.