Lease contents on repairs and insurance Flashcards
Who is responsible in a commercial lease?
A commercial tenant will almost always be responsible for the repair of the premises let to them
How do you determine who is responsible?
Look at the definitions in the lease of:
“Premises”, “Demised Premises”, “ Property” or similar
What are premises defined as in the lease of whole?
Premises will simply refer to the title and postal address of the building
Tenant is responsible for interior, exterior and structural repairs
Repairing is solely the responsibility of the tenant
What are premises defined as in the lease of part?
Premises will specify for example the fifth floor of the office building.
Will be in more detail of the demise such as floor and ceiling covering but not the structrue or exterior of the building
Tenant is only responsible for interior repair
Communal areas are the responsibility of the landlord
what are the two types of repairing covenants and where are they set out?
Set out in the lease
without this the tenant’s implied responsibility for repairs is minimal
- Full repairing obligation
- Qualified repairing obligation
What is the full repairing obligation?
a covenant containing full repairing obligation
eg “to keep the Premises in good repair”
tenant that takes out a full repairing obligation should obtain a survey so they are aware of any major items of repair
What is the qualified repairing obligation?
eg “to keep the Premises in good repair but not to put the Premises in any better state of repair than it was in at the date of this lease as evidenced by the Schedule of Condition”
Schedule of condition will contain pictures showing state of the premises
By definition this is not an FRI lease repair covenant and only likely to be accepted by institutional lenders in exceptional circumstances
What are the limits on repairing obligations?
T can chose whether to repair or replace something
If lease damaged items have to be replaced, T will want the lease to state that they have to be in a state beyond economic repair
What should a tenant taking a lease on a new building ensure?
New buildings may have inherent or structural defects so not fair for tenants to be held responsible for those repairs - Landlord should have guarantees from the contractors he can rely on
So T needs to ensure that the lease excludes structural defects from repairing obligations and service charge contributions
Who is responsible for insurance in a commercial lease?
Almost always the landlord even where it is a lease of whole.
Costs of insurance will be recoverable from the tenant under the lease
In a lease of whole, the landlord will insure the whole, and the sole tenant will refund the landlord the whole of the insurance premium.
In a lease of part, the landlord will insure the whole, and each tenant will refund the -landlord a proportionate part of the insurance premium.
The money that the tenant or tenants pay to the landlord will usually be referred to as “insurance rent”.
