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Commercial Leases - FRI's and Schedules of Conditions

Most landlords of commercial premises want to let their premises on leases that are very much in the landlords’ favour most specifically as regards the upkeep, repair and renewal of same. 

A standard full repairing and insuring lease (“FRI”) imposes all responsibility for such upkeep, repair etc onto the tenant with additional obligations to keep the premises suitably decorated and for the tenant to comply with all regulations and legislation that apply. 

The obligation to “repair” can also include renewal and rebuilding so this is an onerous obligation on a tenant.

One tool which can assist in qualifying a tenant’s repairing obligation is a Schedule of Condition, the purpose of which being to qualify the extent of the tenant’s repairing obligation by reference to the condition of the premises at the commencement of the lease so that the tenant has no obligation to put the premises into a better condition than is disclosed in the Schedule of Condition.

The Schedule identifies visible defects in the premises and should be prepared by a building surveyor. The Schedule comprises both photographs and a written description of the condition of the premises and must be sufficiently specific to ensure the defects can be identified in the future.

While there is a cost incurred in having same prepared by a surveyor, if there is no Schedule or there is a poor record of the premises’ condition at the commencement of the lease, the tenant will have little protection when the landlords enforce the repairing obligation.

By using a Schedule of Condition, a tenant may limit its repairing obligation but that will not, unless specifically narrated in the lease, put responsibility on the landlords for anything excluded by the Schedule.

The lease should, therefore, put responsibility on the landlords to carry out such excluded works throughout the duration of the lease otherwise there could be a defect that causes problems to a tenant- or the operation of their business -  for which no one is responsible.

Even with a Schedule of Condition in place, the original condition of premises is unlikely to remain the same during the term of a lease.  Most tenants will carry out some improvements to the premises during their term so the lease should provide that such improvements are to be disregarded for the purpose of rent reviews otherwise the tenant having paid for the improvements will be doubly penalised when same is  taken into account in the uplift in the rent.

Commercial Property Lawyers Glasgow

If you have any queries regarding the above issue, or wish to speak to one of our specialist commerical property lawyers, please contact us via our online contact form or call us on 0141 413 9489

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