Are you demise wise? Understanding the extent of your demised premises

What is meant by ‘demised premises’?

Your commercial lease almost certainly refers to the “demised premises”. This simply means the land or property to which you have the right of exclusive possession until the lease term expires. A lease should detail precisely the extent of the demised premises, with a plan often provided for additional clarity.

The demised premises are usually apparent when the lease is of an entire property. But if you occupy only part of a building, it may not be.

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Why knowing the extent of the demised premises is so important

Knowing the extent of the demised premises is important because most lease covenants relate to the area demised. This has practical implications, particularly regarding lease repairing obligations, i.e. what is your responsibility, and what is the landlord’s?

These days, landlords are more proactive than ever in ensuring that tenants comply with repairing covenants. So, as a tenant, you should look very closely at your lease to assess the extent of your responsibilities. And that begins with identifying the extent of the demise.

However, the extent of the demise can also be crucial for other reasons. Among recent issues I have encountered are:

• whether compliance with statutory asbestos control is the tenant’s responsibility.
• what happens when a tenant wishes to carry out alterations outside of the demise (e.g. installing a ramp to comply with disability discrimination legislation)? In this case, might the landlord hold the tenant to ransom over the necessary consent?

Most commercial leases fall into one of two categories:

• internal repairing and service charge lease (“IRSC lease”);
• full repairing and insuring lease (“FRI lease”).

IRSC Leases

The area demised in an IRSC lease is only the internal parts of the premises. Typically, this includes the internal wall and ceiling finishes and non-load-bearing walls. The landlord maintains responsibility for the building structure and, in most cases, seeks reimbursement for the maintenance costs from all tenants.

FRI Leases

FRI leases incorporate the structural parts of the premises within the tenant’s demised area. As such, the extent of the demise often includes the external and structural walls. Landlords may also seek to include the foundations of ground floor premises or the roof above top floor premises.

From the tenant’s perspective, FRI leases are usually undesirable because of the onerous maintenance responsibilities. At the very least, they should instruct a surveyor to carefully assess the condition of the structural elements before adopting responsibility for them.

What is my demise?

There are no set rules regarding the extent of the demised area. Although the lease of a whole building could be an FRI or IRSC lease, it’s most likely to be an FRI lease because the landlord will be keen to offload all responsibility for the property during the tenant’s period of occupation.

The lease may refer to “all that property at 1 Edgar Buildings”, in which case the lease is an FRI lease of the whole building located at that address.

Leases of parts of a premises come in various shapes. Perhaps it’s a lease of an office on part of a floor or a ground floor shop with residential premises above. Leases of part can be either IRSC or FRI leases.

The definition of a lease of part is likely to go into considerable detail about which parts are included within the demise and which are not. It’s important to examine each definition closely to determine which parts are the tenant’s responsibility and which are the landlord’s.

As landlords and tenants are always focused on limiting their potential financial exposure, it’s crucial to consider the extent of the demise during lease negotiations. It’s also important to remember that tenants may be responsible for areas outside their demise due to a lease’s service charge and insurance obligations.