Lecture notes
Advanced Real Estate Workshop 8 Notes
- Module
- LPC - Legal Practice Course
- Institution
- LPC - Legal Practice Course
Drafting and negotiating commercial leases
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ADVANCED REAL ESTATE LAW AND PRACTICEUnit 8
Guide
Drafting and negotiating commercial leases: repair, insurance and service
charge
Context
When negotiating a draft lease it is important to understand and keep in mind the
various, sometimes conflicting, interests of the parties. The draft lease is prepared by
the landlord’s solicitor, so will obviously reflect the landlord’s interests. Accordingly,
there will be points which do not reflect the tenant’s interests and therefore the
tenant’s solicitor must be capable of putting forward reasoned arguments and
sensible suggestions for amending the draft lease.
This Unit will look at the repair, insurance and service charge provisions commonly
found in commercial leases today. It will introduce you to some of the more
contentious issues which go to the heart of what it means to have an “FRI” lease.
Outcomes
By the end of this Unit you should be able to:
1. Explain the respective views of the landlord and the tenant on repair, insurance
and service charge provisions in a commercial lease.
2. Explain and evaluate the amendments often made by the tenant’s solicitor to
the repair and insurance provisions in a commercial lease.
3. Consider and apply the service charge provisions in a commercial lease.
Unit Workshop Tasks
In this Unit Workshop you will:
1. Advise on who bears responsibility for certain items of repair and maintenance
under a draft lease.
2. Consider the purpose and acceptability to the landlord of the tenant’s solicitor’s
amendments to the repair and insurance provisions in a draft lease.
3. Advise on the service charge assessment and payment mechanism in a draft
lease and consider the Professional Statement on Service Charges in
Commercial Property.
Preparation
2223_are_ws08_ce01_guide 1 © The University of Law Limited
,To prepare for this Unit Workshop you should:
1. Read the three chapters entitled ‘Repair’, ‘Insurance’ and ‘Lease of Part’ in the
Commercial Property textbook.
2. View Lecture 4.
3. Locate the Professional Statement and Code for Leasing Business Premises
2020 on the website of the Royal Institution of Chartered Surveyors (RICS) and
review the terms, particularly relating to repair and insurance.
4. Locate the Professional Statement on Service Charges in Commercial Property
on the website of the RICS and review its terms, particularly sections 1-4.
5. Complete Test & Feedback – Unit 8 (Preparation).
6. Complete the Unit Workshop Preparatory Task.
Materials required for the Unit Workshop
1. Your notes on the reading and the Unit Workshop Preparatory Task.
2. The Commercial Property textbook.
3. This Guide.
4. The extract from the draft lease of the fifth floor of Oddingshall House, issued
with this Guide.
Consolidation
It is important that you consolidate your learning.
In particular you should:
1. Revise your answers to the Unit Workshop Preparatory Task and the Unit
Workshop Tasks in the light of the feedback you received in the Unit.
2. Complete Test and Feedback - Unit 8 (Consolidation).
© The University of Law Limited 2 2223_are_ws08_ce01_guide
, PREPARATORY TASK
Liability for repair and maintenance in the lease of part
You are a trainee in Gilbraith Saunders LLP. You have returned to the Real Estate
Department to undertake the final seat of your training contract. Your supervisor is
Hu Chang.
Hu acts for Safesound Investments Limited (“Safesound”), a property investment
company with properties all over the country. Safesound has recently agreed terms
for a letting of the fifth floor of Oddingshall House, its newly constructed office
building in Solihull, to Dream Job Recruitment Limited. The agreed Heads of Terms
are on pages 5 and 6 of this Guide. This will be the first letting at Oddingshall House.
Hu has drafted a lease of the fifth floor and sent it to the tenant’s solicitor. He now
wants you to familiarise yourself with the structure and content of the draft lease
before the detailed negotiations begin. An extract from the draft lease is supplied to
you separately from this Guide and you will be referring to it in this Unit and Unit 9.
For the time being, Hu wants you to concentrate on the provisions for the repair and
maintenance of Oddingshall House. During the fifteen-year term of the lease, it is
inevitable that some parts of the building will become worn, damaged or otherwise in
need of repair and replacement.
Read the Heads of Terms and the extract from the draft lease. With reference to
the extract from the draft lease, consider, in relation to each of the items listed
below:
Who will actually carry out the work of repair and/or replacement;
Who will pay for the work to be done; and
Which clauses and definitions in the lease state this.
The items are as follows:
1. Repairs to the false ceiling of the fifth-floor offices.
Who will carry out the work of repair? The Tenant
Who will pay for the work? The Tenant
Which clause(s)? Clause 26.1 which is the repairing covenant. This states the
repair will come within the tenants repairing covenant.
Clause 1.1(b) defines Property to include any false ceilings.
2. Replacement of roof tiles blown off in a storm.
Roof tiles are on the top of the building, not part of the Tenant’s property.
Who will carry out the work of repair? The Landlord
Who will pay for the work? The insurance company
Which clause(s)?
Clause 1.1(i) definition of Property expressly excludes the roof. Clause 1.1
the definition of Insured Risks includes a “storm”. So, the Landlord will
have to insure this risk.
Clause 9.1 states the Landlord should keep the Building insured against
Insured Risks.
2223_are_ws08_ce01_guide 3 © The University of Law Limited
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