The majority, if not all, commercial leases require the tenant to make sure a property is kept to a certain standard both during the term of the lease and at the end when the property is handed back. The specific terms of the lease will dictate the extent of that requirement.
As a landlord, you’ll more than likely know about “dilapidations” – a term used to refer to disrepair at the end of the lease. However, you may not be so clear on what to do if there are repair issues during the lease – we’re here to help.
Most modern leases will allow you to gain entry to check whether the tenant has complied with the lease. If the repair obligations have been breached, you can issue a notice requiring any issues to be fixed within a specified time frame. If the tenant does not do the work, you can go in and do the works and recover the costs from the tenant.
One of the main benefits of this approach is that you can manage the timescales and take prompt action without necessarily ending the lease.
It may also be tempting to leave any repair issues until the end of the lease. Sometimes a minor issue nipped in the bud at an early stage can prevent more significant damage being caused to the property, in particular from leaks and defective heating systems etc.
From a cosmetic perspective, if you own a number of properties on an estate, a poorly maintained property may drag the others down. The right to force the tenant to do repair work can be a useful estate management tool.
Recovering repair costs from the tenant
Once the works are complete, the costs can be recovered as a debt. Given there is still some scope for the tenant to challenge this, we’ve got some top tips:
- The costs need to be reasonable so it is always sensible to get two or three different contractors to tender.
- Care must also be taken to comply with the terms of the lease, not every “repair” obligation is the same.
- Going beyond the scope of the lease could result in a claim by the tenant.
It’s worth remembering, that even with a debt judgment, if the tenant has nothing you will get nothing. It may be worth the risk to mitigate any potential damage to the property if issues are left unchecked.
What happens if it’s gone too far?
If its past the point of no return, most leases contain a forfeiture clause. This allows you to re-enter, terminating or forfeiting the lease in the event of a breach of the tenant’s lease obligations.
If the tenant hasn’t kept up-to-date with paying rent, you can sometimes take the property back without any need to give Notice. For other breaches of the lease, particularly repair, you need to serve a legal Notice (Section 146 of the Law of Property Act 1925).
This Notice requires you to set out what is actually wrong and how the tenant can resolve it (if the issues can be resolved). The Notice needs to give a reasonable time for the tenant to correct out any default.
What is reasonable is a real grey area and will depend on what work is actually required to be done. If it’s a new roof, the tenant will need a longer period of time to do the works than if there are a couple of broken windows or it needs a lick of paint.
Other issues to consider
For leases of seven years or more with at least three years left to run, the tenant also needs to be notified that they can serve a counter-notice if you’re proceeding on the basis of disrepair. This requires permission from the Court before taking back possession.
A further issue arises where there is a mixed-use property, the most common being the traditional ground floor shop with living accommodation above. The law requires “proceedings in the Court” where there is an element of residential property. For a mixed-use property, you cannot simply change the locks – that would be a criminal offence.
Commercial property leases all generally follow a similar format, but there may be substantial differences in the specific terms of the lease. Our team of specialist property lawyers advise commercial property landlords on their options when tenants don’t comply with their obligations.
Posted on May 2, 2018