Tenants' liabilities for maintenance and repairs

If you lease business premises, you need to understand your responsibilities for maintenance and repairs. Whether you are thinking of taking on a new lease or already occupy leased premises, careful reading of the lease and skilful negotiation are crucial if you are to avoid unnecessary problems and expense.

What are your responsibilities?

The tenant’s responsibilities should be clearly spelled out in the lease. Typically the tenant is required to keep the premises in good repair and condition.

• You may well be required to keep the premises in good condition even if they are not in good condition when you first lease them.
• Exactly what standard is required can depend on several factors, including the age and location of the premises, and the condition that a new tenant could reasonably expect.
• You are unlikely to be required to keep the premises in perfect condition, or to rebuild them.
• Your responsibilities typically require keeping the premises in good condition throughout the lease, not just at the end of the term.
• The lease may specify that you are required to redecorate at the end of the lease term. You may also be required to remove and reinstate any alterations you have made.

If you fail to meet your responsibilities, the landlord may serve you with a schedule of dilapidations – either during the term of the lease or once its term is over.

• If you fail to put things right during the term of the lease, the landlord may be entitled to have the works done – and to claim the costs from you. The landlord may also be able to start eviction proceedings.
• Once the lease is over, you no longer have the right to occupy the premises or to carry out any repairs. Instead, the landlord may claim damages, including the costs of repairs, loss of rent from potential future tenants and so on.

Before committing yourself to leasing premises, ensure that your responsibilities are absolutely clear, and that your potential liabilities are not excessive.

• For a new lease, negotiate that you are responsible only for keeping the premises in their current condition, rather than improving them in any way.
• Arrange a survey of the premises. Include a written and photographic schedule of condition as part of the agreement.
• If you are taking over an existing lease, ensure that you understand what repairs or alterations you would need to make to reinstate the premises to the condition required by the lease. Use this to negotiate a reduction in the premium you pay for the lease (or a reverse premium).
• Take advice on exactly what responsibilities the wording of any lease gives you.

You cannot assume that you can put everything right when the lease comes to an end, meanwhile ignoring your responsibilities.

• Make sure you are complying with the terms of the lease. If your lease has a break clause, that lets you get out of the lease at certain points during the tenancy, be aware that you may not be entitled to exercise your break option if you are failing to fulfil your maintenance and repair obligations.
• Consider putting in place a proactive programme of maintenance and repairs. This should be more cost-effective than waiting for things to go wrong, or leaving problems such as leaks to cause more damage.
• Respond to any requests or demands from the landlord in a timely and constructive manner. Negotiation is preferable to confrontation.
• Take advice, particularly if your landlord starts legal proceedings against you. For example, in some circumstances you may be protected against eviction.

Plan ahead at the end of the lease – while you still occupy the premises and have the opportunity to put any problems right.

• Be prepared. Even if you have kept the premises in good condition, your landlord may well attempt to claim for dilapidations.
• Prepare a schedule showing the condition of the premises.
• Try to find out what the landlord’s plans for the premises are.
• Start negotiations in advance. Consider offering a payment to cover any dilapidations instead of carrying out repairs.

Before negotiating, you need to understand as much as possible about your potential liability.

• Even if you have failed to fulfil your repair and maintenance obligations, the landlord cannot recover damages greater than the amount by which the value of his investment has been reduced.
• If you can prove that the landlord plans to demolish or alter the premises in such a way that any dilapidations do not matter, you should be able to limit or even completely avoid any liability.
• Similarly, if the landlord will be letting the premises to a new tenant who wants to substantially alter them, your liability to reinstate alterations might become irrelevant.
• If there is simply no demand for the premises – in any condition – or if they would in any case need substantial upgrading before they could be leased to a new tenant, the landlord is unlikely to be able to claim that you have caused a significant loss.

Your legal adviser can offer specialist knowledge and negotiating skills to help you.

If in doubt, take legal advice.