First FRI Lease - Schedule of Condition

[mangoprint]

Hey all,

In the morning I will be emailed the initial FRI lease for review of a 700 square foot shop.

It's my first time with this kind of lease so I'm hoping for a little advice/assistance as I read through.

Firstly, with regards to the building would a Schedule of condition be enough to protect me should a landlord try and "upgrade the building" at my expense? Or is it better to have a survey done?

The estate agent said that a survey may be a bit overkill and that a schedule of condition can be used to protect you - ie you only have to return the building at the condition it was received in.

The shop itself seems fine on first glance but there is a small back extension with a flat felt roof (the toilet/kitchen area) which is very damp. I'm going to request that the landlord has the felt replaced prior to moving in at his cost.

Also, moving forward I don't want him trying to have it replastered at my cost etc if/should I move in.

Any advice would be greatly appreciated.

Thanks,

Chris

 

[Bob]

Bearing in mind that the downside on an FRI lease can be terminal, unless you are prepared to rely on your own surveying skills, I would look on a survey as a good investment for the future.

There re definitely threads on here where the tenant wished that they had agreed the condition at the outset

 

[mangoprint]

Is a schedule of condition not enough then? This is done by a 3rd party in which you pay for the service, a couple of hundred pounds or so but the agency implied it is not as costly as a full survey.

 

[mangoprint]

Forgot to ask,

With an FRI lease, does the landlord usually pay the building insurance and you reimburse them? Do you then have to take separate contents insurance?

Thanks again,

Chris

 

[Bob]

the agency implied it is not as costly as a full survey.

But then it is also presumably not as thorough as a full survey. Having said that, I guess you would have to look at the documentation appointing the third party to see whether or not they owe you a duty of care and what limitations they place on their report.

So far as the insurance is concerned, it is not unusual for the landlord to pay for the premises insurance and recharge it to you. That way he makes sure it is insured and his asset is protected. You will need contents insurance and business interruption insurance as well as any other insurances relevant to your business

 

[kulture]

Can I suggest that you use a solicitor. The estate agent is the landlord's agent and thus should not be advising you.

 

[Chris Ashdown]

I second Kulture get a solicitor to look after your interests and also get a survey done, both will be money well spent and if you cannot afford both then you cannot afford to take on a shop lease

Contents insurance and third party are your legal requirements along with building insurance which normally the landlord buys and charges you

Also most leases require a personal guarantee even for ltd companies

Beware more sharks in leasing buildings than in the oceans

 

[mangoprint]

Thanks for the advice so far. I'll be having a solicitor looking over the FRI. If there are any cost friendly surveyors on here please drop me a pm

 

[mangoprint]

Here is the actual building.

 

[sarky]

If it's not too late try to get out of FRI. Just negotiate to leave it freshly decorated, carpeted or whatever after you leave.
Insurance: if the landlord buys it do you think he/she will get a good deal for you? Obviously not. Either get them to pay the building insurance themselves or get your own.
Surveyors: a good idea but they will cover themselves by pointing out the worse-case scenario and scaring you. Then their fee will scare you all over again.

That's my pennyworth. I hope that it all works out for you and the best of luck with your venture.

 

[mangoprint]

Thanks. Has anyone had a schedule of condition done before and is it enough protection?

I may be getting it agreed that I won't be liable for any repairs for things like damp walls etc in the initial agreement. We shall see what they come back with.

I've stressed in the initial correspondence that I only want t be liable in returning the building to the standard it was received in.

 

[kulture]

Its a small part of a large property. Get a solicitor. A commercial solicitor. Preferably a local one with local knowledge. Ask their recommendation regarding everything including surveyor and schedule etc.

No-one can possibly answer if a schedule of condition is enough protection because it entirely depends on the wording on the lease. A poorly worded lease could leave you liable for the repairs of the ROOF.

 

[Chris Ashdown]

The reason the landlord buys the building insurance is to guarantee that it is always in force regardless of what the leaser does and is in his (landlords) name, they then invoice you for the cost, but if something happens to the building like in our case this winter where a corner of the roof was blown off in a storm we demanded the landlord contacted the insurers to make good and limited ourselves to the amount shown on the insurance. the landlord actually had more work done at his own cost

 

[S Goodman]

FRI is the norm', you'll be very lucky to get it removed.

No chance of the landlord handing over responsibility for the insurance. You will pay your % of the insurance worked out on the % of space you occupy. There is no real alternative as you are not leasing the whole building.

A survey is wise, but there are alternatives. One retail unit we leased we had agreement that the landlord would pay all repairs for the first three months. This worked as we totally stripped the shop to refit and current problems were therefore apparent. About £3k of repairs were required and we then knew the shop was as good as it could be. If your not going to be totally gutting place back to bare brick get a survey.

 

[mangoprint]

Thanks, they have just had all new plaster boards put up that I intend on using. The problem is for a thorough survey, we would have to rip them down so I'll see if we can get a clause put in where we are not responsible for the walls behind the boards, if that is possible!

 

[kulture]

All things are possible. It is entirely up to negotiating. With such a large building and you only renting one floor, then it is not impossible to get an internal repair and decorate only lease. After all, you do not want to be responsible for damage to your walls if there is a water leak from upstairs. You do not want to have to pay for any roof repairs. You really need to see a solicitor and a local surveyor before agreeing any more. The key thing to remember is that it is the lease that determines your liability, and any survey may be meaningless unless the lease acknowledges it.

 

[mangoprint]

Reading the below, I think a schedule of condition should be enough as long as I have it documented well in the lease stating that I'm only reaponsible for maintaining the standard and not for any leaks from above etc. Thanks for all the assitance so far.

https://www.simplifythelaw.co.uk/commercial-property/repairs-alterations-premises/schedule-condition

 

[mangoprint]

Hey all, currently at the solicitor stage. Has anyone ever managed to have this clause removed?

My solicitor says that it is pretty standard but has added the words "and reasonable" in for a bit more protection.

"
1.1 The Tenant shall pay the Landlord within 14 days of demand a fair and reasonable proportion of all costs payable by the Landlord for the maintaining, repairing, rebuilding, lighting, cleaning and renewing all mutual or party walls roofs foundations fences roads and footpaths (if any) common areas Service Media landscaping structures and any additional items that the Landlord may deem necessary from time to time (acting reasonably and in the interests of good estate management) serving and benefiting the Property and/or the Centre and which are capable of being used in common with the owners or occupiers thereof as well as any adjoining or neighbouring premises and the provision of such other services as the Landlord shall from time to time reasonably consider desirable for the more efficient operation and management of the Centre or for the comfort and convenience of the majority of the occupiers of the Centre TOGETHER WITH the reasonable provision for anticipated expenses and the reasonable and proper fees of the Landlord's managing agents for supervision and management of the Property, the Centre and any adjoining or neighbouring premises and to keep the Landlord indemnified against such proportion of such reasonable costs and expenses and if any dispute shall arise between the Tenant and the owner and occupiers of any neighbouring premises the Landlord's surveyor may (acting reasonably and in accordance with the principles of good estate management) determine in writing such dispute on the part of the Tenant in such fair and proper manner as he or they shall think fit and the Tenant shall abide by such determination."

I have spoken with the shop next door of this property who says the area is ok, however they did have some external works done recently where they tried passing on the bill of 10k although I believe they didn't have to pay it in the end.

I'm having a schedule of condition done internally so my main concern is that any external liability is minimised.

Thanks for advice in advance!