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D2
FRI vs IRI Lease
How you split repairing and insuring obligations shapes your rent, your risk and your dilapidations position. Compare full repairing with internal repairing.
Compare your options
FRI (full repairing and insuring)
Pros
- Tenant carries all repairs, internal and structural
- Minimal landlord exposure
- Strong dilapidations position at lease end
Cons
- Harder to let to smaller tenants
- Effective rent appears lower
- Needs a schedule of condition on tired buildings
Best for: Longer single-let leases to stronger covenants.
IRI (internal repairing and insuring)
Pros
- Attractive to occupiers
- Landlord controls the structure
- Costs recovered via service charge in multi-let
Cons
- Landlord carries structural and external cost
- Higher headline rent needed
- More active management
Best for: Multi-let buildings and shorter lettings.
Worked scenarios
Single-let warehouse, strong tenant
| Option | Outcome |
|---|---|
| FRI | Usual choice: hands-off, tenant maintains the building. |
| IRI | Rarely needed unless the tenant demands it for a premium rent. |
Multi-let office building
| Option | Outcome |
|---|---|
| FRI | Hard to apply cleanly across shared structure. |
| IRI | Standard: landlord holds the structure and recovers via service charge. |
Decision checklist
- Decide who realistically maintains the structure given the building and tenant.
- On an older building, take a schedule of condition to cap the tenant's liability.
- Model the effective rent, not just the headline.
- For multi-let, get the service charge recovery clause right.
Relevant tools
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