UK FRI Lease (Full Repairing and Insuring)

A Full Repairing and Insuring (FRI) lease is a UK commercial lease structure under which the tenant takes on the full economic burden of keeping the property in repair, paying the building insurance premium (recharged by the landlord), and — critically — handing the property back at lease end in the same repaired condition it was in at grant. Nearly every multi-let office, retail unit, and industrial building in England, Wales, Scotland, and Northern Ireland is let on FRI terms. The legal force of "full repairing" means the tenant can inherit liability for disrepair that already existed when they took occupation, unless they recorded the property's condition photographically at the outset.

The dilapidations claim at the end of an FRI lease — the landlord's bill for putting the property back into the contractual standard — routinely runs from £15,000 for a small office suite to £150,000+ for a 5,000 sq ft retail unit or warehouse. Tenants who didn't negotiate a Schedule of Condition before signing usually pay close to the full claim. Tenants who did, and who understand the Section 18(1) cap under the Landlord and Tenant Act 1927, often pay a fraction.

What "Full Repairing and Insuring" actually means

The lease will contain three distinct tenant covenants that, together, create the FRI burden:

1. Repairing covenant — typically worded "to keep the premises in good and substantial repair and condition" or "in repair and good condition throughout the term and at the end of the term to yield up in such condition." The phrase "keep in repair" has been interpreted by English courts since Proudfoot v Hart (1890) to mean the tenant must put the property into repair if it isn't already — not merely maintain its current state.

2. Insurance covenant — the landlord insures the building and recharges the premium to the tenant (plus an administration fee in many leases). On a multi-let estate this is apportioned by floor area.

3. Service charge covenant — on a multi-let property, the tenant pays a pro-rata share of common-parts maintenance, structural repairs to the building envelope (sometimes), and management fees. Read your service charge clause carefully — many include capital expenditure pass-throughs disguised as "repairs."

The combined effect: the landlord receives the rent net of all property costs (hence "clear yield"). Investors price UK commercial property assuming FRI terms; deviation from FRI reduces the asset's investment value, which is why landlords resist it strongly.

Why the Schedule of Condition is your single most important protection

A Schedule of Condition is a photographic and written record of the property's condition at the date of lease grant, appended to the lease as a contractual schedule. The repairing covenant is then qualified: "to keep the premises in no worse condition than as evidenced in the Schedule of Condition annexed hereto."

The economic effect is straightforward. Without a Schedule of Condition, the landlord's surveyor at lease end measures the property against an idealised "good and substantial repair" standard. With one, the surveyor measures against the documented condition at grant — meaning the tenant is not liable for pre-existing dilapidations they inherited.

A proper Schedule of Condition costs £800–£2,500 for a typical small commercial unit (a chartered building surveyor's day rate plus report). On a property where the building is 15+ years old, has visible wear, has had previous occupiers, or has any sign of latent defects (damp, roof age, window condition), this is the single highest-return spend a tenant will ever make in lease negotiations. The downstream dilapidations saving regularly runs £20,000–£80,000.

The Schedule must be:

• Prepared by an independent chartered building surveyor (not the agent, not the tenant)
• Photographic, room-by-room, with date stamps
• Reviewed and accepted by the landlord before lease completion
• Annexed to the lease as a formal schedule, with the repairing covenant explicitly cross-referenced to it

See the FRI and Schedule of Condition entries in the glossary for the precise terminology and the clause library for example wording.

Dilapidations: what happens at the end of the term

In the final 6–12 months of the lease (or sometimes after expiry), the landlord's surveyor produces a Schedule of Dilapidations — an itemised list of every breach of the repairing covenant, with costed remedies. The schedule will typically include:

• Decorations — interior and exterior redecoration that the lease requires "in the last year of the term" or "every X years and at expiry"
• Repairs to fabric — wall damage, ceiling repairs, floor damage, joinery
• Building services — HVAC servicing, electrical certificate compliance (EICR), gas safety certification
• Reinstatement of tenant alterations — removing tenant fit-out, partitions, signage, fixtures
• Statutory compliance items — fire safety, asbestos register updates, EPC

The headline number on a typical schedule for a 2,500 sq ft office is £35,000–£60,000. For retail with bespoke fit-out being reinstated, £60,000–£120,000. For industrial with mezzanines, racking, or specialist services to remove, £80,000–£250,000+.

The schedule is the landlord's opening position. The tenant's response — usually via their own surveyor — is where the negotiated settlement lands, often at 30–60% of the schedule, depending on how strong the tenant's position is on the Section 18(1) cap.

The Section 18(1) cap — the statutory ceiling

Section 18(1) of the Landlord and Tenant Act 1927 is the single most important piece of dilapidations law for English and Welsh tenants. It caps the damages a landlord can recover for a breach of the repairing covenant at the diminution in the value of the landlord's reversion — meaning the difference between what the property is worth in its current condition and what it would be worth in the covenanted condition.

The practical effect is that if the landlord is going to demolish the building, comprehensively refurbish it, or re-let it to a tenant who will gut and refit it anyway, the diminution in value is often nil — or close to it — even if the repair cost is high. The cost of repair is evidence of diminution; it is not the cap itself.

To run a Section 18(1) defence properly, the tenant needs:

• A surveyor's expert valuation of the property's market value in its current condition vs. its covenanted condition
• Evidence of the landlord's intentions for the property (planning applications, marketing materials, a sale to a developer)
• A formal Quantified Demand and response in the RICS Dilapidations Protocol format

Section 18(1) applies to England and Wales only. Scotland operates under different common-law principles (the Singh v Bhasin line of authorities) and does not have a direct statutory equivalent — Scottish dilapidations are usually settled on a cost-of-works basis. Northern Ireland has its own statutory framework that mirrors the 1927 Act in substance. See the England and Wales jurisdiction guide and the broader United Kingdom commercial lease guide for regional detail.

IRI as the negotiable alternative

An Internal Repairing and Insuring (IRI) lease narrows the repairing covenant to the interior of the premises only — leaving the structure, exterior, roof, foundations, and main services as landlord responsibilities. The tenant still reimburses insurance. IRI is the standard in shorter leases (1–3 years), serviced offices, and smaller suites within a larger building.

For longer leases (5+ years) on whole buildings, landlords resist IRI because it reduces the investment value of the asset. However, you can negotiate partial IRI carve-outs even within an FRI structure:

• Exclude roof, foundations, main structural walls, and external rendering from the tenant's repairing obligation
• Cap tenant liability for inherent or latent defects (defects existing at the date of grant, undiscoverable on a reasonable inspection)
• Carve out plant and equipment that the landlord owns and operates (boilers, lifts, HVAC central plant)

These carve-outs alone can reduce the dilapidations exposure on a 10-year lease by £40,000–£100,000+, depending on the building.

Negotiation tactics that move the needle

The five highest-impact lease changes for FRI tenants are, in order of typical savings:

1. Schedule of Condition — annexed to the lease, with the repairing covenant qualified by reference to it. Saves the largest amount of money of any single negotiation in a UK lease.

2. Cap on service charge — a fixed annual cap or a percentage cap on year-on-year increases (typically 5%, subject to RPI). Without a cap, service charge can rise unpredictably as buildings age and capital works become due.

3. Exclusions from service charge — explicit exclusion of: replacement (as opposed to repair) of plant; capital improvements; works to remedy defects existing at the date of grant; works to bring the property up to current statutory standards (this is the landlord's pre-existing obligation, not a tenant cost).

4. Repair-only covenant, not "repair and renew" — wording that limits the tenant to "keep in repair" (which has a defined legal meaning) rather than "keep in good condition" (which is broader and can require improvement beyond mere repair).

5. Reinstatement clarity — schedule the tenant alterations explicitly at the outset, and agree which alterations the landlord requires to be reinstated at end of term vs. which can remain. Vague "reinstate to the landlord's reasonable satisfaction" wording is a dilapidations claim waiting to happen.

For the precise contract language for each of these, see the clause library.

Real example: the £85,000 Schedule of Condition difference

A serviced office operator took a 10-year FRI lease on 4,500 sq ft of a 1980s Manchester office building. Headline rent £67,500/year. No Schedule of Condition was negotiated at grant.

At year 9, the landlord's surveyor served a Schedule of Dilapidations for £127,000 — redecoration, full HVAC replacement (existing units were 22 years old at grant), suspended ceiling replacement, and reinstatement of tenant partitioning. The tenant settled at £102,000 after eight months of dispute, paying £25,000 in surveyor and legal fees.

A photographic Schedule of Condition at grant — costing approximately £1,800 — would have established that the HVAC was already at end-of-life, the suspended ceiling was already damaged, and the decorative state was already tired. Those pre-existing items would have been excluded. Estimated saving: £65,000–£85,000.

The Schedule of Condition is the highest-ROI line item in a UK commercial lease negotiation. It is not optional on any FRI lease over 3 years.

How BizLeaseCheck helps

BizLeaseCheck reads your UK lease in seconds, flags whether it is FRI, IRI, or a hybrid, and surfaces every clause that affects your dilapidations exposure — including missing Schedule of Condition references, vague reinstatement wording, uncapped service charge, and pre-existing-condition liability. The report identifies which clauses can be negotiated before signing and quantifies the likely cost difference. See a sample report or upload your UK lease for a free preview.

Not legal advice. UK commercial leases are technical documents and Section 18(1) defences depend on building-specific evidence — use the BizLeaseCheck report to identify issues for discussion with a chartered building surveyor and qualified UK property solicitor before exchange.