Advice With Repairing and Insuring Leases

[Arehman99]

Hi

I am searching for a commercial property for my business and I see majority of the commercial properties come with a ‘full repairing and insuring lease’. Is this a common type of lease? I am slightly nervous as it appears you could have more to lose then gain with such leases.

Has anyone ever taken out such leases or has any feedback to share? Any advice will be appreciated as I continue my search for a commercial property.

I do intend to use a solicitor but I am conducting the property search myself and want to ensure I select the right type.

Thank you!

 

[Mr D]

Sometimes a condition of a lease can be removed or changed by agreement - may well be a counter proposal or payment required for dropping a point. Not always - appears some just try see what they can get away with.

 

[Chris Ashdown]

Full repairing and insuring is normal on commercial buildings and you have to be advised by a solicitor or you can get easily stung by it. the details are important. It can be just leaving it as you found it or may mean you are duty bound to repair anything that has failed over the lease, say a leaking roof, my last lease stipulated i had to paint the inside and outside every 5 years and the landlord paid to have it done prior to us moving in. that why you need a solicitor to go over the small print

Regarding the insurance, its normal for the landlord to insure the building and then invoice you for the cost plus vat. this just guarantees the land lord that it is always insured, its up to you to then insure for your own protection things like third party, broken shop windows etc

 

[Darren_Ssc]

I viewed a building a while ago with such a lease and I backed out since it was an old listed building with some fairly obvious issues.

Aside from a solicitors advice I would get a a full structural survey from a qualified surveyor before going any further since you could be lumbered with a big liability.

 

[Arehman99]

Full repairing and insuring is normal on commercial buildings and you have to be advised by a solicitor or you can get easily stung by it. the details are important. It can be just leaving it as you found it or may mean you are duty bound to repair anything that has failed over the lease, say a leaking roof, my last lease stipulated i had to paint the inside and outside every 5 years and the landlord paid to have it done prior to us moving in. that why you need a solicitor to go over the small print

Regarding the insurance, its normal for the landlord to insure the building and then invoice you for the cost plus vat. this just guarantees the land lord that it is always insured, its up to you to then insure for your own protection things like third party, broken shop windows etc

Hi Chris, did your lease run smoothly till the end? I am new to this hence bit nervous as I don’t want want to get stung before, during or after the lease. Thanks for your reply

 

[Arehman99]

I viewed a building a while ago with such a lease and I backed out since it was an old listed building with some fairly obvious issues.

Aside from a solicitors advice I would get a a full structural survey from a qualified surveyor before going any further since you could be lumbered with a big liability.

Thanks, Darren. Have you since undertaken a lease elsewhere?

 

[Darren_Ssc]

Thanks, Darren. Have you since undertaken a lease elsewhere?

Yes, a simple rental agreement where the landlord is responsible for upkeep of the building.

 

[Arehman99]

Yes, a simple rental agreement where the landlord is responsible for upkeep of the building.

Is there room for ‘negotiation/flexibility’ with the lease in general?

A simple rental agreement would be my preference but a lot of shops I have seen are offering a lease. I also expect a lot of shops to become vancant in the coming days/weeks so might keep an eye out for a good deal rather than rushing. Thank you for your help.

 

[Darren_Ssc]

Is there room for ‘negotiation/flexibility’ with the lease in general?

A simple rental agreement would be my preference but a lot of shops I have seen are offering a lease. I also expect a lot of shops to become vancant in the coming days/weeks so might keep an eye out for a good deal rather than rushing. Thank you for your help.

There is always room for negotiation but you have to take into account the landlord's position. If the property fell into his/her lap via inheritance then he/she is going to be a lot less willing to bargain than someone who has a mortgage to pay.

I see a few businesses for sale around me and, when you look into it, the business is pretty much worthless, they are just lumbered with a long-term lease they are trying to get out of. You don't really want to get into such a situation if at all possible.

 

[CHUKTC]

As others have said above - get a full survey done before you sign. I know of people (and it almost happened to me) where at the end of the lease you are landed with a large repair bill. At the need of the lease the landlord will normally get a dilapidations survey done. This will then be handed to you with a demand to fix all the issues identified or the landlord will fix at your expense. Use your survey at the beginning to negotiate via your solicitor that any existing defects will not be your responsibility to repair. The same applies if you are reassigning an existing lease - the responsibilty for repairs passes to you. I summary get a survey and a good commercial solicitor - It can save you a lot of money in long term.

 

[Arehman99]

As others have said above - get a full survey done before you sign. I know of people (and it almost happened to me) where at the end of the lease you are landed with a large repair bill. At the need of the lease the landlord will normally get a dilapidations survey done. This will then be handed to you with a demand to fix all the issues identified or the landlord will fix at your expense. Use your survey at the beginning to negotiate via your solicitor that any existing defects will not be your responsibility to repair. The same applies if you are reassigning an existing lease - the responsibilty for repairs passes to you. I summary get a survey and a good commercial solicitor - It can save you a lot of money in long term.

Thank you!

 

[Chris Ashdown]

Yes my lease went well

Look at it from the landlords perspective they rent you a building and expect you to keep in it good repair as well as paying rent, a not unreasonable request

You can discus anything about the contract but the landlord will need assurance that you will look after the building.

Anyone not taking legal advice when signing a lease unless a expert in the law will be very unwise and as stated above also a surveyors report. Imagine after setting up and a few years down the line you have to shut up as those nice square walls are covered in asbestos and crumbling

Just consider the surveyor and lawyers as extra insurance and make allowances for them with your due diligence

 

[Arehman99]

Yes my lease went well

Look at it from the landlords perspective they rent you a building and expect you to keep in it good repair as well as paying rent, a not unreasonable request

You can discus anything about the contract but the landlord will need assurance that you will look after the building.

Anyone not taking legal advice when signing a lease unless a expert in the law will be very unwise and as stated above also a surveyors report. Imagine after setting up and a few years down the line you have to shut up as those nice square walls are covered in asbestos and crumbling

Just consider the surveyor and lawyers as extra insurance and make allowances for them with your due diligence

Thanks, Chris

 

[Deleted member 59730]

At the need of the lease the landlord will normally get a dilapidations survey done. This will then be handed to you with a demand to fix all the issues identified or the landlord will fix at your expense.

I knew someone who had painted an industrial unit white. The landlord chased him to repaint it in the original Magnolia.

 

[MOIC]

Beware of a "Schedule of Dilapidation' clause in the lease.

Depending on the type of property (especially if it's old), your solicitor should advise a surveyor to submit a report on the condition of the building.

 

[Arehman99]

Beware of a "Schedule of Dilapidation' clause in the lease.

Depending on the type of property (especially if it's old), your solicitor should advise a surveyor to submit a report on the condition of the building.

Thanks for your time. I will definitely get a surveyor and ensure I am protected before I sign anything. Thanks for your help.

 

[kulture]

The thing to remember is that everything is open to negotiation. Especially in a buyer’s market, which I suspect will be the case these days. For all the properties I have rented, I always made clear to the agent that I would not sign a full repairing lease. Once a deal fell through because I stuck to this, but in all other cases we came to alternative and better arrangements. The best I got was internal decoration and insurance.

As in any negotiation it depends on who wants to close the deal more.

 

[Arehman99]

The thing to remember is that everything is open to negotiation. Especially in a buyer’s market, which I suspect will be the case these days. For all the properties I have rented, I always made clear to the agent that I would not sign a full repairing lease. Once a deal fell through because I stuck to this, but in all other cases we came to alternative and better arrangements. The best I got was internal decoration and insurance.

As in any negotiation it depends on who wants to close the deal more.

Thank you. I also was thinking to myself I will not sign a full repairing and insuring lease. Yeh the buyers’ market is certainly something I hope will help. Thank you very much for your time.

 

[MBE2017]

My solicitor saved myself a fortune on a full repairing lease. The building had subsidence and the landlord hoped I would just sign and accept the full cost of repairs.

I ended up with half price rent and no repairs until they could prove the building had stopped getting worse, it never did.

 

[Socio South West]

Totally endorse other posters' comments about using a surveyor if any level of maintenance is to be included in the lease.
The caveat.... don't go for the cheapest surveyor: Get one (he will probably be independent) who brings a boiler suit, wellies and rubber gloves and is prepared to lift drain covers, crawl around in musty lofts and poke wooden window frames with a penknife. It might cost a few more quid initially, but the potential savings long term are considerable.

 

[Arehman99]

Totally endorse other posters' comments about using a surveyor if any level of maintenance is to be included in the lease.
The caveat.... don't go for the cheapest surveyor: Get one (he will probably be independent) who brings a boiler suit, wellies and rubber gloves and is prepared to lift drain covers, crawl around in musty lofts and poke wooden window frames with a penknife. It might cost a few more quid initially, but the potential savings long term are considerable.

Thank you

 

[Alison Moore]

We had a ‘full repairing and insuring lease’. When we took out this lease it was a landlords market and there were hardly any commercial properties around. We used a solicitor, but the advice we got from him was poor (his company was later formally stuck off for bad practices!). After less than a year in the property one of the walls started to lean and we had to have it rebuilt. It cost us about £10k and there was no come back on the insurance or the landlord. These days it's a very different market, and with so many empty properties I would imagine you can negotiate much more favourable terms. Most landlords prefer fully repairing leases as you're 100% responsible for everything to do with the building, but the days of commercial properties being desirable assets and in high demand are gone. Definitely have a survey done - it's worth considering the building a bit like your own home, you don't get to own it, but you are 100% responsible for it.

 

[Arehman99]

We had a ‘full repairing and insuring lease’. When we took out this lease it was a landlords market and there were hardly any commercial properties around. We used a solicitor, but the advice we got from him was poor (his company was later formally stuck off for bad practices!). After less than a year in the property one of the walls started to lean and we had to have it rebuilt. It cost us about £10k and there was no come back on the insurance or the landlord. These days it's a very different market, and with so many empty properties I would imagine you can negotiate much more favourable terms. Most landlords prefer fully repairing leases as you're 100% responsible for everything to do with the building, but the days of commercial properties being desirable assets and in high demand are gone. Definitely have a survey done - it's worth considering the building a bit like your own home, you don't get to own it, but you are 100% responsible for it.

Thank you very much for your time, Alison!