24 Jul 2010
Who Pays for Structual Repairs?
We own a tenanted commercial property and in the lease there is a provision that the tenant is responsible for repairs and maintenance of the premises with the exception of structural components. I cannot find any definition or guide in the lease as to what meaning should be given to the word 'structural'. I have always assumed that it refers to the components of the building that give it form and strength and prevent its collapse. The tenant has recently pointed out a number of repairs that are required on the property and we want to be fair about who pays for the repairs. In order to work out who is responsible for what, could you please give an indication of what repairs will be considered structural?
You have asked a very good question. As it turns out determining what is "structural" is not as clear cut as it seems. As you have pointed out the term is not defined in your lease. In fact what is structural is seldom defined in leases. To get an idea of what it might mean you have to get guidance from case law. This will then help with determining who is responsible for what repairs.
Unfortunately, none of the legislation relating to property contains a definition of structural. The closest is the definition of "structure" in the Property Law Act 2007. However this definition has limited application and does not extend to leases.
The courts have grappled with this term and there is some case law on what constitutes a structural repair. In a recent case, a tenant paid for repairs required to keep the premises (a hotel in this case) up to date with fire safety regulations and then sought reimbursement from the building owner. The clause in the lease stated "...the Lessee shall not be responsible for the cost of any structural repairs resulting from the provision of this [repairs] clause." The District Court held that reglazing windows and replacing a glass door with a more compliant solid wooden one were structural repairs as once attached, they became part of the structure of the hotel. However, there were a number of other items the parties debated over. Because of the complexity of evaluating each individual repair, the court looked at what was fair and divided the costs on that basis. This shows how difficult it is defining what is a structural repair.
The meaning of "structural alterations" or "structural additions" has also been debated by the courts in the context of cross leases and unit titles. Often an addition or alteration of a structure is prohibited in these situations. Structural alterations or additions have included removing an internal wall, extending a bathroom out, construction of a second storey with a glassed stairwell and atrium, and the addition of a pergola. These decisions show that for something to be structural, it may need to be something that affects the integrity of the building as a whole and the building envelope in particular.
Hopefully this gives you some guidance in determining what is and is not a structural repair. Unfortunately it is not possible to give a concise list of repairs that qualify as each case is likely to be decided on a case by case basis. We would recommend working through each item that requires repair and trying to decide whether it affects the integrity of the building.
In the interests of certainty, we suggest that in any new leases you add a clause in your lease defining exactly what repairs to the building are the owner's responsibilities. Taking into account the case law mentioned above, we feel your idea of items that give the building form and preventing it from collapse is a good starting point.
A final point to note when evaluating a tenant's requirement to repair under a lease, is that the obligation of each clause must be evaluated by the words used, but at the same time having regard to the age and nature of the premises at the beginning of the lease. Put simply, your tenant will not be liable to bring the premises up to date, change its character or substantially modify it in order to modernise the building.
This week's question is answered by Senior Associate Daniel Kelleher and Law Graduate, Niven Prasad.