RECOVERY OF FREEHOLD REPAIRING COSTS FROM A SUB-TENANT

I am the landlord of high street commercial premises. These consist of a retail shop with offices above. The retail tenant had a fully repairing and insuring headlease of the whole building. The office tenant has an internal lease of the office space. The head lease has been surrendered because the tenant is insolvent, and the premises are in a poor state of repair. The roof and the windows in particular require replacement. Can I recover any repair costs from the sub-tenant?   Author: Richard Anyamene

While the office tenant will now be your direct tenant, your ability to recover repair costs from him is likely to be limited. As he has an internal demise, the repairing obligations under his lease will be restricted to the premises that he occupies. These will not include areas such as the roof; the exterior of the building or any common parts.

One question that we are sometimes asked is whether windows will come within a tenant’s repairing obligations in these circumstances. Tenants with an internal demise commonly retain responsibility for keeping windows in good repair, and windows have both internal and external elements.

Case law is fairly inconclusive on the point. In one case, plate glass windows were held to be part of the ‘skin of the house’ and therefore part of the external parts. In another, windows – including frames and glass – were held not to be part of the ‘main walls’ of a building. Accordingly a common sense approach is required that looks at the physical characteristics of the property. Where, as in this case, windows and frames require complete replacement because the external parts have deteriorated, then the tenant will not be liable for the repair costs, as once they have been replaced the internal parts of the windows will not be in disrepair. The possible exception might be where the internal window frames are in disrepair also because the tenant has failed to maintain the parts that he is responsible for in which case a contribution to the costs might be appropriate.

Further, if the original window frames were in a poor decorative condition, owing to the tenant’s failure to comply with decorating obligations, and the replacement windows require painting internally, then this cost may be recoverable. However, the tenant may argue that the poor decorative state of the window frames was due to the external deterioration, and resist a claim successfully on this basis.

The other option for the landlord may be to recover costs via the service charge provisions in the office tenant’s lease. A well drafted sub-lease is likely to require the sub-tenant to contribute to the head tenant’s costs of maintaining the building – to the extent that these include common parts from which the sub-tenant benefits, such as the roof; stairwells and passages – as well as the windows serving the sub-tenant’s premises. Sometimes, ‘maintenance’ will involve replacement of parts of a building, if this is the only sensible means of addressing disrepair.
Unlike repairing obligations (which can commonly require a tenant to put premises into repair even if they were not in repair when they were let), however, service charges are subject to a general reasonableness obligation. Accordingly, if:

• the roof and windows were in a poor condition when the office tenant took his lease;
• replacement is required as part of a cyclical repair period where the cycle is considerably longer than the term of the tenant’s lease; or
• the disrepair is the result wholly or partly of the head tenant’s own failure to comply with repairing obligations in the headlease,

the tenant will have grounds on which to resist liability for service charges.

Conclusion:
Before assuming that you will be able to recover the costs of major repairs to premises from a former sub-tenant, or from a tenant of only part of a building, you must consider very carefully the extent of his repairing obligations; whether he is subject to comprehensive service charge obligations, and the parts of the building to which these relate. It will be a question of fact as to whether certain repairs fall within the definition of the premises to which the tenant’s obligations relate.