TL;DR
- FRI shifts repair, insurance, and service charge to the tenant — model it explicitly.
- Break clauses are heavily litigated — vacant possession is the single most-failed condition.
- Dilapidations at lease end are commonly £35-£75/sqft on a high-end fit-out">fit-out.
- Business rates are statutory and are not the same as the service charge.
- Rent reviews are typically open-market every 5 years — and they are upward-only.
What FRI actually means
Full Repairing and Insuring is the dominant lease structure for UK Class A office. Under FRI, the tenant takes responsibility for: (a) the cost of internal repair and decoration, (b) reimbursement of the landlord's building insurance, and (c) a proportional share of building maintenance via the service charge. For a multi-tenant office, the tenant's repair obligation is typically limited to the demised premises — not the structure or the common parts. A Schedule of Condition appended to the lease can cap the repair obligation at the standard recorded on lease commencement; on older buildings this is essential.
Break clauses — the conditions are everything
A 10-year FRI lease with a tenant break at year 5 is the standard institutional structure. The break itself is straightforward; the conditions are where most disputes arise. The four common conditions are: (1) **vacant possession** — the premises must be returned with no occupiers, no goods, and no chattels; (2) **no material breach** — all covenants must be performed; (3) **all rent paid** — no arrears at the break date; (4) **service notice** — typically 6 months' written notice in a specified form. Vacant possession is the most-litigated condition. It has been held to be breached by leaving partition walls in place, by leaving cabling in floor voids, and by failure to remove a small number of bolts. Engage solicitors on the break notice 12 months before exercise.
Dilapidations — the planning estimate
On lease end, the landlord will serve a Schedule of Dilapidations claiming the cost of returning the premises to the standard required by the lease. For a high-end Cat A fit-out, plan for £35-£75 per square foot. The eventual settlement is typically negotiated below the schedule total — but provision the high end as a planning estimate. A Schedule of Condition on lease commencement is the single best dilapidations defense. So is a strip-out and reinstatement budget set aside from year one.
Rent reviews and business rates
Office leases typically include a five-yearly upward-only open-market rent review. Negotiate **collared and capped** reviews where possible — fixing a minimum and maximum movement. Business rates are a separate statutory tax — not the same as service charge. Rates are payable directly by the tenant to the local authority, calculated as approximately 50% of the rateable value annually. Provision for them as a known cost; budget for the rates revaluation cycle (currently every three years).