The repairing obligations in your commercial lease could cost you a fortune at the end of your tenancy — or protect you completely, if handled correctly from day one. Our senior surveyor Rebecca Thornton, who specialises in commercial dilapidations, explains what every commercial tenant needs to know before they sign.
What Are Repairing Obligations in a Commercial Lease?
In a commercial lease, repairing obligations define who is responsible for maintaining and repairing the property — and to what standard. Unlike residential tenancies, where tenant repairing obligations are limited by statute, commercial leases are largely a matter of contract. Parties are free to agree whatever allocation of repair they like, and landlords typically negotiate for the most comprehensive tenant obligations possible.
Understanding your repairing obligations before you sign a commercial lease is one of the most important steps any commercial tenant can take. Getting this wrong can result in a dilapidations claim at the end of your lease that runs into hundreds of thousands of pounds.
What Is a Full Repairing and Insuring (FRI) Lease?
The most common form of commercial lease is the Full Repairing and Insuring (FRI) lease. Under an FRI lease, the tenant takes on full responsibility for:
- Keeping the property in good repair and condition throughout the term
- Carrying out all redecoration works at specified intervals (typically every 3–5 years internally, and every 5 years externally)
- Reinstating any alterations at the end of the lease
- Yielding up the property in the condition required by the lease at the end of the term
Critically, the standard of repair required under an FRI lease is not the condition of the property when you took it on — it is the condition of a property that has been properly maintained throughout. This means that if you take on a building that is already in poor condition without a schedule of condition, you could be required to return it in a better state than you found it.
Internal vs External Repairing Leases
Not all commercial leases are FRI. In multi-tenanted buildings — shopping centres, office blocks, business parks — the landlord often retains responsibility for the external envelope and common areas, with the tenant responsible only for internal repairing. These are sometimes called Internal Repairing and Insuring (IRI) leases.
The distinction matters enormously from a dilapidations perspective. Under an IRI lease, the tenant cannot be claimed against for roof defects, structural issues or external wall damage — these remain the landlord's responsibility. Under a full FRI lease for a whole building, all of these fall on the tenant.
What Is "Good Repair" and Why Is It Contentious?
The legal standard of repair in most commercial leases is "good repair and condition" or "good and substantial repair". But what does that actually mean?
The courts have interpreted "good repair" as requiring the property to be returned in a condition appropriate for a property of its age, character and locality. This is more demanding than it sounds. A Victorian warehouse in "good repair" needs to function properly as a commercial building — with weathertight roof, sound structure and serviceable services — even if some age-related character features remain.
Disputes about the standard of repair required are common. Your surveyor's role in a dilapidations dispute is partly to assess what "good repair" actually means for this specific property — and to challenge any claim that sets the bar unreasonably high.
What Happens at Lease End? The Dilapidations Process
As your lease end approaches, here is what you should expect — and what you should do to protect yourself:
12–18 Months Before Lease End
Instruct a building surveyor to carry out a dilapidations liability assessment. This will tell you, honestly, what works you owe under your lease. It gives you time to carry out those works yourself — which is almost always significantly cheaper than paying a landlord's contractor to do them later.
If you have a schedule of condition attached to your lease, your surveyor will compare the current condition of the property to the schedule and identify which items are genuinely your liability.
At or After Lease End: The Terminal Schedule of Dilapidations
After the lease ends (or sometimes slightly before), your landlord will typically serve a terminal schedule of dilapidations — a document listing all the repairs, reinstatement works and redecoration they claim you owe. This may be accompanied by a quantified demand — a costed schedule showing the landlord's claimed financial settlement.
Landlords' schedules of dilapidations are frequently overstated. Items are included that aren't covered by the lease, costs are inflated, and the principle of betterment (the landlord cannot claim for works that would put the property in a better condition than was required) is sometimes ignored.
Your Response: The Counter-Schedule
Within a reasonable period, you should instruct a surveyor to prepare a counter-schedule on your behalf. This challenges each item in the landlord's schedule — accepting those items that are genuinely your liability, challenging those that aren't, and providing your own cost assessments where appropriate.
The counter-schedule, combined with a Section 18(1) diminution valuation (see below), is your primary defence against an inflated dilapidations claim.
What Is a Section 18(1) Diminution Valuation?
Section 18(1) of the Landlord and Tenant Act 1927 provides that a landlord's dilapidations claim is capped at the diminution in the value of the landlord's interest in the property caused by the disrepair. In simple terms: if the disrepair hasn't actually reduced the value of the property (because the landlord is going to demolish it anyway, or has already re-let it in its current state), the tenant's liability is correspondingly reduced.
A Section 18(1) valuation is prepared by a surveyor and can dramatically reduce a tenant's exposure — sometimes to near zero in cases where the landlord has already re-let the property or carried out a refurbishment that would have been necessary regardless.
"In one case I worked on, the landlord was claiming £280,000 from a tenant for reinstatement of partitioning and alterations at the end of a 15-year office lease. The landlord had already agreed to let the property to a new tenant at an enhanced rent, and the new tenant had commissioned their own fit-out. Our Section 18(1) valuation demonstrated that the alleged disrepair had caused zero diminution in the landlord's property interest — because the property was going to be stripped out regardless. The settlement was £22,000. The moral? Always instruct a surveyor before agreeing any dilapidations settlement."
Tenant's Top 5 Mistakes with Commercial Lease Obligations
- Not commissioning a schedule of condition. The single biggest mistake. Without one, your baseline liability is uncapped. Read our full schedule of condition guide.
- Ignoring the lease until it's too late. Many tenants don't look seriously at their dilapidations exposure until they receive a schedule from the landlord. By then, it's much harder and more expensive to manage.
- Carrying out alterations without reinstatement provisions. If your lease requires you to reinstate alterations at lease end, check before you fit out whether you want to agree a licence for alterations that specifically removes the reinstatement obligation.
- Accepting the landlord's dilapidations schedule without challenge. These schedules are almost always overstated. Never accept one without getting your own surveyor's advice.
- Not instructing a surveyor early enough. The sooner you get advice, the more options you have. We've seen tenants turn around what looked like catastrophic dilapidations claims — but only because they engaged a surveyor early.
How Our Dilapidations Service Can Help
Whether you are a landlord preparing a schedule or a tenant facing a claim, our dilapidations service is here to protect your position. We cover both sides of the landlord–tenant relationship and bring the same rigour and expertise to every instruction.
Our average saving on tenant dilapidations claims is 60% of the original landlord schedule. Get in touch to discuss your situation — we respond within 2 working hours.