Understanding full repairing and insuring obligations is essential before you sign any commercial lease. This guide explains who pays for repairs, who arranges insurance and how an FRI lease can expose you to significant cost. We also look at schedules of condition, service charges and dilapidations, and how our commercial lease solicitors can help protect you.
The short phrase "full repairing and insuring" hides a great deal of legal and financial weight. It is one of the most common forms of commercial lease in England and Wales, and yet it routinely catches tenants out. The expression can suggest that every tenant personally repairs and insures every part of a building. That is not always how the arrangement works in practice.
What really matters is who ends up bearing the cost, and what the particular lease actually says. The GOV.UK guidance on renting a business property confirms that the lease should state who is responsible for repairs and maintenance. Nothing should be assumed.
Our team of specialist commercial lease solicitors advises tenants and landlords day in and day out on these obligations. This guide draws on that experience, and the legal framework that governs repairing covenants, to help you understand where you stand.
Who Repairs?
Lease dependent
Who Insures?
Often the landlord
Who Pays?
Usually the tenant
Protection?
Schedule of Condition
Full repairing and insuring obligations are commercial lease terms that generally make the tenant financially responsible for maintaining, repairing and insuring the leased property. In practice, the landlord may arrange the buildings insurance or carry out structural repairs, particularly in multi-let properties, while recovering those costs from the tenant.
An FRI lease is one of the most common forms of commercial property lease. But the label can be misleading, because the way obligations are divided between landlord and tenant depends heavily on the type of building and the structure of the demised premises. What matters is who ultimately bears the cost, and what the lease wording provides. You can read more about the basics in our guide to what a full repairing and insuring lease involves.
Under a typical FRI commercial lease, the tenant is responsible for keeping the premises in the state of repair required by the covenant. For a standalone building, that responsibility may extend to the structure, roof, exterior and interior. For part of a multi-let building, the responsibility is commonly divided differently between landlord and tenant.
A tenant taking an entire building may be responsible for:
The precise extent depends on the definition of the premises and the wording of the covenant. Our commercial lease repairing obligations advice can help you see exactly what you would be taking on.
In a multi-let building, the tenant will commonly repair the interior of its own premises, while the landlord repairs the roof, structure, exterior and common areas. The landlord then recovers some or all of those costs from tenants through the service charge, so the lease can remain effectively full repairing from a financial point of view.
For example, an office tenant occupying one floor cannot practically organise repairs to the entire roof. A typical structure might look like this:
| Area | Who carries out the work | Who ultimately pays |
|---|---|---|
| Interior of tenant's unit | Tenant | Tenant |
| Building structure | Landlord | Tenants via service charge |
| Roof | Landlord | Tenants via service charge |
| Reception and corridors | Landlord | Tenants via service charge |
| Lifts | Landlord | Tenants via service charge |
| External areas | Landlord | Tenants via service charge |
The service charge provisions therefore deserve just as much attention as the direct repairing covenant. Our commercial property service charge guide explains how these costs are recovered and challenged.
In many FRI leases, particularly institutional and multi-let properties, the landlord arranges the buildings insurance and the tenant reimburses the premium through an insurance rent or service charge. The tenant may separately need its own cover for contents, public liability, business interruption and other risks not covered by the landlord's policy.
The lease should explain:
An FRI lease therefore usually means the tenant bears the insurance cost, not necessarily that the tenant takes out the buildings policy itself. Our commercial lease insurance obligations advice looks at these clauses in detail.
Potentially, yes. A broadly drafted repairing covenant can expose a tenant to liability even where deterioration existed before the lease began. Depending on the condition of the property and the wording of the covenant, keeping the premises in repair may require the tenant to put them into the required state of repair in the first place.
This is one of the biggest risks for tenants taking older premises. Imagine a warehouse with a leaking roof, damaged brickwork, old windows and deteriorated flooring. The tenant may think, "I did not cause that damage, so it cannot be my responsibility."
That assumption can be dangerous. The lease wording, the existing condition and any agreed limitation must all be examined before completion. A lease risk assessment is a sensible first step.
A Schedule of Condition records the property's condition when the tenant takes the lease, and can be used to limit repairing liability where the lease is drafted accordingly. A photographic schedule alone is not enough if the repairing covenant does not expressly limit the tenant's obligation by reference to that schedule.
A well-prepared Schedule of Condition may include photographs, written descriptions, existing defects, cracks, damp, damaged surfaces, roof condition, windows, doors and internal fittings.
The lease might then state that the tenant is not required to put the premises into any better condition than evidenced by the agreed schedule. That wording can make a substantial financial difference. Our schedule of condition advice for commercial tenants explains how to get this protection properly documented.
Our specialist solicitors can review your lease and explain exactly what you are responsible for repairing and insuring before you commit.
A tenant that breaches its repairing obligations may face enforcement during the lease, or a dilapidations claim when the tenancy comes to an end. The landlord may seek the cost of remedial works or damages, although statutory and common law rules can affect the amount recoverable and the appropriate remedy.
Dilapidations can include breaches relating to repair, decoration, reinstatement of alterations, removal of tenant fixtures and compliance with the yielding-up provisions.
Section 18 of the Landlord and Tenant Act 1927 can limit damages for breach of a repairing covenant in certain circumstances, including by reference to the reduction in the value of the landlord's reversion caused by the breach. This does not mean tenants can ignore repair obligations. It means the calculation of a dilapidations claim can be more complicated than simply adding up every item in a schedule of works.
Our commercial lease dilapidations solicitors can help tenants respond to, and where necessary defend, these claims.
Before accepting full repairing and insuring obligations, a tenant should understand the property's current condition, exactly what falls within the leased premises, the extent of structural responsibility and how insurance and service charges operate. Potential repair costs should be assessed before the rent and other commercial terms are finally agreed.
What exactly are you leasing? Check whether the roof, structure, windows and external areas form part of the premises.
What condition is the property in? Consider obtaining an appropriate building survey.
Is the repairing covenant limited? Check whether it requires repair regardless of the condition at commencement.
Do you need a Schedule of Condition? This is particularly important for older premises.
Who repairs the structure? Establish whether this is your direct obligation or the landlord's responsibility.
What can the landlord recover through service charge? Look carefully at major works and structural expenditure.
Who arranges insurance? Check both landlord and tenant insurance obligations.
What happens after insured damage? Review rent suspension and termination provisions.
What must you do at lease expiry? Consider repairs, decoration and reinstatement obligations.
What could the exit cost be? Budget for potential dilapidations from day one.
For a fuller run through, see our first commercial lease checklist of 30 points to check before you sign.
An FRI lease generally leaves the tenant bearing the full financial burden of repairing and insuring the property, directly or indirectly. An internal repairing lease normally limits the tenant's direct repairing responsibility to the interior, with the landlord retaining responsibility for structural and external areas, although costs may still be recovered through service charges.
| Issue | FRI Lease | Internal Repairing Lease |
|---|---|---|
| Internal repairs | Usually tenant | Usually tenant |
| Structural repairs | Tenant directly or indirectly | Often landlord |
| Roof and exterior | Tenant directly or via service charge | Often landlord |
| Buildings insurance cost | Usually tenant | Depends on lease |
| Potential repair exposure | Often higher | Usually more limited |
| Schedule of Condition | Often important | Can still be useful |
Always read the actual lease rather than relying solely on the description "FRI".
Yes. Full repairing and insuring obligations are commercial terms and may be negotiated before the lease is completed. Depending on bargaining strength, the condition of the property and the length of the lease, a tenant may seek a Schedule of Condition, a service charge cap, exclusions for inherent defects or other limitations on repairing liability.
Potential negotiations include:
The best opportunity to address these issues is normally before the lease is signed. Our commercial lease advice for tenants and our lease negotiation for tenants service can help you negotiate better terms.
Full repairing and insuring obligations can place substantial financial responsibility on a commercial tenant. The crucial point is that FRI does not always mean the tenant personally organises every repair and every insurance policy.
For a standalone property, the tenant may repair almost everything directly. For a multi-let property, the landlord may maintain and insure much of the building but recover those costs from tenants. Either way, the financial exposure can be significant.
Before signing, make sure you understand the condition of the property, the repairing covenant, the service charge, the insurance provisions and the potential dilapidations liability. Taking stock of these issues before you commit can save you thousands of pounds down the line.
Need to go deeper into a particular aspect of your commercial lease? These guides and services are relevant to full repairing and insuring obligations:
Understand what a full repairing and insuring lease involves.
Get advice on commercial lease repairing obligations.
Insurance covenants, reinstatement and rent suspension explained.
30 things to check before signing a commercial lease.
FRI lease and dilapidations liability at the end of the term.
Specialist solicitors who is responsible under an FRI lease.
Our commercial lease solicitors can advise landlords and tenants on full repairing and insuring leases, repairing covenants, schedules of condition, service charge provisions, buildings insurance clauses, dilapidations, heads of terms and lease negotiations.
Contact Commercial Lease Specialists before agreeing full repairing and insuring obligations, so you understand what you may have to repair, what you may have to pay for and how your liability can potentially be limited.