Commercial Tenant and Insurance Claim?

Reply to the comment left by Graham Bowcock at 19/03/2022 - 17:46
That's strange, I have stand-alone properties and multi lets. In 45 years I have never had a problem with FRI leases, insurance claims, or repairs.
I don't go the greedy route though, I realise that my valued tenants have a living to make, so I either do the work myself for which I make no charge or I get competitive quotes and the cost is split according to the square footage of each unit.

Reply to the comment left by neilt at 19/03/2022 - 18:45
It sounds like you have "effective FRIs" rather than actual FRIs. With a full FRI the landlord doesn't normally get involved in the repairs at all; I own some standalone offices that are all let on FRI terms and basically I have nothing to do.

Where there are shared parts (e.g. roofs) you can't grant an actual FRI, but you can grant an effective one where the tenant reimburses the cost of repairs.

My management business manages lots of local shop/flat type properties in the town and there are service charges to cover the costs of repairs to the fabric of the building.

Yes, Graham, you're right, thanks for your observation. I've never thought about it in those terms.
I use the Law Society Business Lease - Part of Building - and it appears to be an effective FRI, which has always worked well for me.
For those that have, like me, not come across the terminology 'Effective FRI', a solicitor on Google explains;
Effective FRI means that the tenant is not directly responsible for all repairs, etc but the landlord is able to recover the cost of repairs, etc to the common structure from the tenant

Reply to the comment left by neilt at 21/03/2022 - 10:05
Sounds like I need to do some reading up.

In the case of the scenario with two tenants and the owner - would the effective FRI mean ALL repairs to the common structure/fabric of the building mean a total split between the two tenants OR between three to include the owner?

Reply to the comment left by Graham Bowcock at 21/03/2022 - 09:32
So how do you breakdown a shop with flats above in this scenario?
If building is a total three layered box (for example ) shop, ground, F1 & 2 flats?
Denote a third of the total insurance cost is an 'effective FRI' to the commercial tenant?

Reply to the comment left by DSR at 22/03/2022 - 12:16
To answer your first point about share of costs, if the owner is not in occupation (i.e. it is all let) then the owner would bear no costs.

As for breakdown, the parties need to consider what is fair. It is often done on a square footage basis, but that may not work for everybody.

Reply to the comment left by DSR at 22/03/2022 - 12:07
If the two tenants are the sole occupiers of your building, then it's split between the two. If the owner has part occupation then he has to be included in the split.
I find that as a LL it's prudent to do some of the minor repairs or maintenance at my own expense.
It creates an atmosphere of trust plus you can always include it in the next rent review if necessary.
Entirely up to you, of course.

Reply to the comment left by neilt at 21/03/2022 - 10:05
what about the EPC issue?

How do you deal with the (potential) issue when the legislation changes to state that a higher rating is needed (to be able to legally let).

If changes to the fabric of the building are needed to meet the new rating - is this the tenant or the LL responsibility to pay for this?
It could be argued that as it is so the building can be legally let, but if it is so the tenant can trade (and the benefits of the insulation/new lighting etc will ONLY benefit the tenant directly), the tenant should pay???

Tricky question. I have that coming up. At the end of the day, you would have to let out something fit for purpose, I would guess. Additionally, any upgrading that you do would be an improvement, in my view. So I'm happy to foot the bill for this and get the expense back later with increased rent.
One of my tenants has changed all of the fluorescent tubes over to the energy-efficient equivalent. This benefits him with regards to his energy bills.
So there is room for negotiation if you take this route

Reply to the comment left by neilt at 22/03/2022 - 15:10
tricky but needs thinking about... If for arguments sake to get the property to an EPC C rating top be able to let and it was a D or E then clearly I would pick the cheapest option to do this to make the building compliant to let. If the tenant on the other hand didn't want such works, or the works were not conducive to how she uses the premise then there would need to be some leeway as to what would be the common ground here. I would be hesitant in paying any more over and above the cost to make it compliant AND to have works that the tenant purely wanted, especially if the works make the property too space/type restrictive to any future tenants. Going to be a bloody minefield...