B P Collins’ commercial property and property dispute teams provide a comprehensive overview of what a landlord needs to know.
A tenant that is granted a full repairing lease of a commercial property will usually be obliged to keep the property “in good and substantial repair and condition”. This standard of repair requires the tenant to keep or put the property in repair during the term of the lease, as the case may be. In addition, a tenant will be bound by various covenants relating to decoration, yielding-up and reinstatement of alterations carried out under the lease or a supplemental document. If a tenant breaches its repairing covenants, its landlord may be entitled to claim damages on the expiry of the lease for items of disrepair at the property, which are known as dilapidations.
Tenants often seek to limit its repair obligations by reference to a Schedule of Condition, which would provide a detailed record of the condition of the property as at the date of the lease. This would require the tenant to put the property back into the condition it was in at the beginning of the term, but in no better standard than that. Similarly, a landlord may wish to include a Schedule of Condition if the property is new or has been recently refurbished to ensure the property is returned in the same high standard of condition at the end of term. A well-documented Schedule of Condition can in fact be a useful tool for both parties as an agreement on the standard of repair and condition at the outset can prevent disputes arising in the future.
As a landlord, you will want to ensure that the tenant complies with its covenants and returns the property to you in a condition which preserves the value of your interest and does not prevent you from reletting the property. If a tenant fails to comply with its obligations, it is important that you are able to recover any losses incurred as a result from the tenant. It is best practice to consider the tenant’s covenants in detail when negotiating the heads of terms for a new lease and to include them in the lease and/or any supplemental documents (as appropriate) at the time of grant. This will establish the tenant’s liabilities in respect of the state and repair of the property from the outset, and thereby reduce the chance of a dispute when the expiry of the term approaches.
Furthermore, including a specific clause within the lease to allow the landlord to enter the property during the term to carry out any repair works required (a “Jervis v Harris” clause) and an express right of re-entry for the landlord, would provide the landlord with further remedies for a tenant’s breach of repair during the term of the lease. It is advisable to carry out regular inspections throughout the term to monitor the tenant’s compliance with its covenants within the lease.
If you are thinking of granting a lease, or you are approaching the end of an existing lease, and would like advice our Commercial Property team can assist. Please contact enquiries@bpcollins.co.uk.
If you are required to serve a schedule of dilapidations on your tenant, we would strongly recommend that you check the terms of your lease first and instruct a surveyor to assess the property and prepare the schedule to ensure the amount being claimed is a realistic value. Our Disputes Resolution team is experienced in, and can assist with, the dilapidations claims process. Please contact 01753 889995 or email enquiries@bpcollins.co.uk for further information.
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