Published in Retail Newsagent Magazine, 30 Jan 2015
I often get asked by my clients to assist them with identifying which parts of their leasehold property they are responsible for maintaining themselves and when they should carry out any work they are obliged to undertake under the terms of their lease.
It’s a very important issue and I have dealt with several cases recently where tenants have neglected the maintenance obligations in their lease and have therefore faced a very big bill at the end of it.
Looking after a commercial building can be expensive and, generally, the older it gets the more attention it will need. Leases will always define your repair obligations and it is very important to know and understand what these are when buying a business or opening a new shop.
The repair obligations for the majority of news and convenience retailers will either be internal or full repairs. For internally repairing leases the tenant is responsible for the internal part of the building only, with the exception being the entire shop front. For shop premises, this is always made the responsibility of the tenant, including the insurance of any plate glass.
For fully repairing leases, the tenant is responsible for the maintenance of the whole building. This includes all of the internal space and any second floor accommodation such as flats. It also includes the roof, drains, outside areas and so on. The tenant is expected to maintain the building as if it was their own at all times and I always advise any retailers I speak to that they do just that.
Most leases will identify in general terms the maintenance items that need carrying out regularly. For example, there is nearly always an obligation that the interior of a property is repainted every three years. Other repairing obligations are not outlined specifically as it would make the lease too long. Common sense must be used and it is a very good idea to carry out a regular inspection of the property to identify any potential problems before they escalate. If you are not confident in doing this, it is a good idea to get a reputable builder to do it for you.
Landlords will always have the right to inspect the property at any time to ensure that all is well and that it is being maintained. However, most landlords do this when a lease is coming up for renewal and many will do this informally without involving a chartered surveyor. Where the landlord chooses to bring in a surveyor to inspect the property, this cost is normally passed on to the tenant and it can be expensive depending on the size and age of the property. The surveyor will prepare a ‘schedule of dilapidations’ which identifies exactly what work the tenant is expected to carry out and will also give an approximate cost.
If the tenant is vacating the premises at the end of the lease the schedule will be more detailed and exhaustive. One of my clients received a dilapidations survey recently that identified £48,000 worth of work that the landlord required. In these cases it is a good idea to employ your own surveyors and get them to act in negotiations for you. It is possible to negotiate this figure down but you can still end up having to find a sizeable sum of money to put the building back the way the landlord wants it.
So what can you do to prevent yourself falling into this situation? Carrying out a regular inspection of the property is essential. Preventative maintenance is vital if bigger, more costly problems are to be avoided later on. It is also very important to pay attention to areas that are not always visible like gutters or things that may be hidden behind chillers or in a store room. If you spend a little each year maintaining your shop you have a better chance of avoiding a large bill later on.
- Make sure you read and understand the repair obligations of your lease
- Inspect your shop premises regularly or get a professional to do this
- Carry out regular preventative maintenance
- Ensure that any minor issues are dealt with immediately
- Establish an annual budget for maintenance
- Treat your leasehold shop like it is your own property