FRI vs IRI Leases: Which Protects the Landlord?

How repairing obligations are split is one of the most important things in a commercial lease. The two common structures are FRI and IRI.

Full Repairing and Insuring (FRI)

Under an FRI lease the tenant is responsible for all repairs, internal and external and structural, and the landlord insures the building and recovers the premium. This is the landlord-friendly position: the building is kept in repair at the tenant's cost, and your exposure is minimal. It is standard on longer single-let leases.

Internal Repairing and Insuring (IRI)

Under an IRI lease the tenant repairs only the interior, and the landlord keeps responsibility for the structure and exterior. The headline rent is usually higher to reflect the landlord's greater obligations. IRI is common in multi-let buildings, often combined with a service charge that recovers the cost of maintaining common and structural parts.

The schedule of condition

Whatever the structure, a schedule of condition taken at the start of the lease records the state of the property and can cap the tenant's repairing obligation at that condition. It is vital where the building is not in perfect order, because without it the tenant can be liable to hand the property back in better condition than they took it. See dilapidations.

Which to choose

FRI transfers cost and risk to the tenant but suits single-let buildings and stronger covenants. IRI with a service charge suits multi-let buildings where the landlord must control the structure. The FRI vs IRI decision sets out the trade-offs with worked numbers.

What does FRI mean in a commercial lease?

Full Repairing and Insuring: the tenant is responsible for all repairs, internal and structural, and the landlord insures the building and recovers the premium.

Why does a schedule of condition matter?

It records the property's state at the start of the lease and, where the lease refers to it, caps the tenant's repairing obligation at that condition.