REALWorld Law

Commercial leases

Repairing the leased space

Who pays for the maintenance and repair of the real estate actually occupied by the lessee?

United States

United States

In the typical commercial lease, a tenant will be directly responsible for maintaining and repairing certain portions of the interior of the leased premises at its own cost and the landlord will be responsible for repairing and maintaining the exterior, structure and common areas of the property, subject to reimbursement, typically with some limitations, by tenants through the shared operating expense mechanism whereby all of the tenants proportionately share the cost of maintaining and operating the common facilities. Some leases require tenants only to pay increases above those operating expenses that the landlord incurred in a set ‘Base Year’. With ‘ground leases’ and certain types of ‘net leases’, the tenant will be directly responsible for repairing and maintaining the entire leased premises at its own expense. In ‘net leases’ in principle the tenant is responsible for the cost of operating, insuring and paying taxes on the real property. A ‘ground lease’ is a sub-specie of net lease where the tenant is given rights to develop a parcel of land leased to it.