The importance of having a Schedule of Condition in your commercial lease

Why is having a Schedule of Condition necessary?

Without having a Schedule of Condition the tenant can find himself in financial difficulty at the end of the lease, if the lease requires him to ‘put’ and ‘keep’ the premises in ‘good and substantial repair’.
The case of Welsh v Greenwich LBC [2000] 49 EG 118 demonstrated that an obligation to ‘keep’ the property in ‘good condition’ can require works to be carried out even if there is no disrepair. Therefore, it is imperative that a Schedule of Condition is considered to limit any repairing obligations and avoid potential costly disputes in the future!
If you are thinking about taking a lease for commercial premises, it is usual under the terms of the lease for the tenant to have repairing obligations. However, you should ensure that you are fully aware of the extent of your repairing obligations and where possible, seek to limit them with reference to the Schedule of Condition of the property when you take the lease.
We set out below some useful guidelines for you to consider when entering into your commercial lease.

What is a Schedule of Condition?

A Schedule of Condition acts as photographic and written evidence of the state of the property at the time the lease is granted. It will consist of a list of photographs and additional descriptions of the property and is annexed to the lease.

How will a Schedule of Condition protect the Tenant?

The effect of having a Schedule of Condition in the lease is that the tenant is not expected to put the property in any better state of condition of repair that it was at the start of the lease. Therefore, a Schedule of Condition sets a benchmark against which the property can be assessed in the future.
The tenant is able to instruct a Chartered Surveyor to produce a Schedule of Condition but it is important that any photographs are of good quality and in full colour.
What is the impact of a Schedule of Condition in the repairing covenant in the lease?
It is important to limit the wording of the tenant’s repairing obligations in the lease by referring to the Schedule of Condition so that the tenant does not have to keep the property in any better state of repair, condition and decoration than evidenced by the schedule.
Many leases include an obligation to ‘put and keep’ the premises in repair. However, the effect of a ‘put and keep’ obligation can be to require a tenant to improve the premises. Therefore, faced with this potential onerous liability to improve the premises, the tenant may negotiate a less onerous repairing covenant (referring to the Schedule of Condition) which would then exclude any obligation to improve the premises.
Such proviso to the repairing covenant could potentially read as follows: ‘… providing that the Tenant is not obliged to put or keep the Premises in any better state or condition than at the date of this Lease, as evidenced by the Schedule of Condition’

When is a Schedule of Condition essential?

We would recommend that where the tenant is proposing to take a lease of a property which is in poor condition or where the repairing covenant is onerous, serious consideration should be given to limiting the repairing liability by reference to a Schedule of Condition to ensure the tenant is not liable to remedy repairs caused by a previous tenant.

How can Askews help you?

Askews Legal LLP has a dedicated team of Property specialists who can assist with any commercial property issues. For further advice or to obtain a quote, please contact Kuljeet Sandhu, Head of Commercial Property at Askews Legal LLP
E: KSandhu(at)askewslegal.co T: 024 76 231000

Askews Legal LLP – Solicitors Coventry.