Leasehold transactions 2

Repairing obligation

Tenant’s duty to keep premises in repair

Demise and repair

Repair obligation depends on extent of premises let

Tenant covenant to repair

Essential clause in commercial leases

Full repairing covenant

Obligation to put and keep premises in repair

Qualified repairing covenant

Repair limited to condition at lease start

Schedule of condition

Photographic record of condition at lease commencement

Repair vs renewal

Repair restores; renewal replaces entirely

Beyond economic repair

Where replacement is more sensible than repair

Condition obligation

Obligation to keep in good condition, stricter than repair

Inherent defect

Design or construction defect present from outset

Structural defect

Defect affecting structure of building

Exclusion of defects

Tenant should exclude inherent and structural defects from liability

Landlord insurance

Landlord insures building in commercial leases

Insurance rent

Tenant contribution to insurance premium

Insured risks

Risks such as fire, flood, storm, explosion

Rent suspension

Rent not payable while premises unusable due to insured risk

Uninsured risk

Tenant remains liable and rent not suspended

Land Registry prescribed clauses

Mandatory clauses for registrable leases

Structure of lease

Long document with defined terms, schedules, and covenants

No standard form

Commercial leases vary by precedent and drafting style

Tenant break conditions

Often limited to rent paid and vacant possession

Unreasonable break conditions

Conditions such as “no breach of covenant” should be resisted

Alterations covenant

Controls tenant’s ability to alter premises

Absolute covenant

No alterations permitted

Qualified covenant

Alterations permitted with landlord consent

Fully qualified covenant

Consent not to be unreasonably withheld

s19(2) LTA 1927

Landlord cannot unreasonably withhold consent for improvements

Change of use covenant

Restricts permitted use of premises

s19(3) LTA 1927

Landlord cannot charge for consent except for structural alterations

Damage by insured risk

Tenant relieved from repair and rent suspended

Damage by uninsured risk

Tenant must repair and rent continues

Purpose of lease structure

Balance landlord income protection with tenant usability

Overall aim (commercial lease)

Secure income for landlord while enabling tenant’s business use