When leasing commercial property, it’s crucial to understand the type of lease agreement you’re entering. One of the most common—and often misunderstood—arrangements in the UK and other regions is the Full Repairing and Insuring Lease (FRI Lease).https://www.herrington-carmichael.com/full-repairing-and-insuring-lease/#:~:text=A%20full%20repairing%20and%20insuring%20lease%20(%E2%80%9CFRI%20Lease%E2%80%9D),elements%20of%20an%20FRI%20lease.
Thank you for reading this post, don't forget to subscribe!In this article, we’ll break down exactly what a full repairing and insuring lease is, how it works, who it benefits, and what both landlords and tenants need to consider before signing.
What is a Full Repairing and Insuring Lease?
A Full Repairing and Insuring lease (FRI lease) is a commercial property lease in which the tenant is responsible for all repairs, maintenance, and insurance of the property during the lease term.
Under an FRI lease:
- The tenant pays for all necessary repairs to the building.
- The tenant arranges or reimburses the cost of building insurance (often arranged by the landlord).
- The landlord has minimal responsibility for the physical condition or upkeep of the property.
This type of lease is typically used in long-term commercial rentals, such as offices, warehouses, or retail units.
Key Features of an FRI Lease
Let’s take a closer look at the main elements of a full repairing and insuring lease:
1. Full Repairing
The tenant is responsible for:
- Internal and external repairs
- Roof, walls, floors, windows, doors
- Electrical and plumbing systems
- Structural integrity (unless otherwise stated)
Even if the building was already in poor condition when the lease started, the tenant may still be liable to maintain or restore it, unless otherwise specified.
2. Insuring
The tenant either:
- Takes out their own insurance policy, or
- Reimburses the landlord for the cost of the landlord’s policy
Insurance must usually cover the building (not contents), including risks like fire, flood, storms, and other damages.
3. Lease Term
FRI leases are usually long-term, often 5 to 25 years, although shorter terms can also include FRI clauses.
4. Dilapidations
At the end of the lease, the tenant is often required to return the property in good condition. If not, they may have to pay for any repairs—a process called dilapidations.
Advantages of a Full Repairing and Insuring Lease
✅ For Landlords:
- Reduced responsibilities – The tenant handles maintenance and insurance
- Lower risk – The building is maintained in good condition
- Steady income – No interruption from maintenance-related costs
- Predictable expenses – No surprise repair costs
✅ For Tenants:
- Potentially lower rent – Rents on FRI leases are often lower because tenants take on more responsibilities
- Greater control – Tenants manage maintenance on their own terms
- Long-term security – FRI leases are usually long-term, offering business stability
Disadvantages and Risks
⚠️ For Landlords:
- Difficult to enforce if the tenant fails to maintain the property properly
- Reletting issues if the property is returned in poor condition
⚠️ For Tenants:
- High costs – Repairs and insurance can be expensive, especially in older buildings
- Dilapidation liabilities – End-of-lease repair costs can be a financial burden
- Unexpected issues – Tenants might inherit structural problems they didn’t cause
Key Considerations Before Signing an FRI Lease
Whether you’re a tenant or a landlord, here are some things to consider:
🔍 Property Condition
Tenants should always commission a building survey before signing. This ensures they understand what repairs they might be responsible for during and after the lease.
📝 Lease Clauses
Pay close attention to:
- The exact definition of “repairs”
- Whether you’re responsible for structural repairs
- Who arranges and pays for insurance
- Responsibilities for common areas or shared parts of the property
🔧 Schedule of Condition
A schedule of condition is a detailed record (usually with photos) of the property’s condition at the start of the lease. It protects tenants from being held responsible for existing damage.
Common Alternatives to FRI Leases
In some cases, parties may prefer alternatives to a full repairing and insuring lease, such as:
🏢 Internal Repairing Lease (IR Lease)
- The landlord handles structural and external repairs
- The tenant maintains only the interior
🧾 Gross Lease
- The landlord covers all repairs and insurance
- The tenant pays an all-inclusive rent
🧮 Service Charge Lease
- The landlord manages repairs and passes the costs on to tenants as a service charge
- Often used in multi-tenant buildings
Frequently Asked Questions (FAQs)
Q: Does FRI mean the tenant insures the building?
A: Yes, either directly or by reimbursing the landlord, the tenant is responsible for the cost of insuring the building (not the contents).
Q: Can the landlord still do inspections?
A: Yes, landlords often retain the right to inspect the property to ensure it’s being maintained properly.
Q: What happens at the end of the lease?
A: The tenant may be liable for any repairs needed to return the property to its original condition, unless limited by a schedule of condition.
Q: Can a tenant negotiate the lease terms?
A: Absolutely. Tenants can negotiate to exclude certain repairs or limit liability using a schedule of condition or tailored clauses.
Conclusion: Is a Full Repairing and Insuring Lease Right for You?
A Full Repairing and Insuring Lease can be a practical solution, but it comes with responsibilities. For landlords, it’s a low-risk way to protect their property investment. For tenants, it offers autonomy and potentially lower rent—but at the cost of increased responsibility and financial risk.
Before signing an FRI lease, both parties should:
- Understand the repair and insurance obligations
- Consider a building survey and legal review
- Use a schedule of condition to protect against unfair liabilities
By doing your due diligence, you can make the most of an FRI lease and avoid unexpected surprises down the road.