SCHEDULES OF CONDITION
An agreed Schedule of Condition at the commencement of a commercial tenancy and attached to the lease is the most effective way of limiting future dilapidations liability.
Unfortunately, our experience suggests that most prospective tenants do not receive best advice before signing commercial leases and entering into onerous full repairing obligations. Most do so without understanding the likely dilapidations consequences at the end of the tenancy. If you are considering a commercial tenancy, the Code for Leasing Business Premises in England and Wales 2007 provides useful guidance on best practice.
Lease wording varies significantly and exact wording is of critical importance. A lease is a binding contract and fully understanding the terms of the lease is the first step in understanding likely future liabilities for repair.
Most leases break the tenant's obligations into repair, redecoration, alterations and removal of tenant's goods. If these clauses are not limited, they can require the tenant to leave the building in better condition than at the beginning of the lease.
The function of a Schedule of Condition is to accurately record the condition of the demise with reference to repairing obligations set out in the lease.
Without a Schedule of Condition, it is difficult for a tenant to argue that items in a final Schedule of Dilapidations are invalid due to the disrepair being present at the beginning of the term. This means the tenant may end up unfairly penalised paying for or repairing items for which they should not be responsible.
A Schedule of Condition may be more important when a lease is being transferred from an existing tenant. Any new tenant may inherit not only the disrepair present at the beginning of the original lease, but also any disrepair caused by the occupation of the existing tenant.
The Schedule of Condition is set out in a tabulated format to identify items of disrepair normallyreferenced to a plan of the property and with indexed photgraphs or video footage as supporting evidence.
A professionally prepared and detailed survey of the building will highlight existing defects and help develop an overview of the future maintenance and repair obligations.
For a Schedule of Condition to be fully valid, it must be attached to the lease and signed by both Landlord and Tenant. Without formal attachment in this way, the schedule may be disregarded during dilapidations negotiations.
The cost of preparing a Schedule of Condition is dependent of the type, size and complexity of any building. However, the cost in relation to the likely saving in dilapidations liability can not be overstated and is usually a very small fraction of the savings achieved.
We would be happy to discuss specific details and provide detailed costings for the provision of a Schedule of Condition anywhere in the UK or overseas.