BLOG: Why a Schedule of Condition is essential when taking up a new Lease
Taking on a business premises under a Lease is something that many businesses must do to grow their business. However, many business Directors do not approach Leases with the care and attention that they warrant. As Tenants they are sometimes unaware of the extent of their obligations regarding the repair and upkeep of the commercial premises when signing a Lease.
One simple precautionary step that can be taken prior to taking up a Lease is to have a detailed Schedule of Condition prepared, by an experienced Chartered Building Surveyor.
A Schedule of Condition Report involves a detailed survey of the building and a photographic and descriptive report. The purpose of a Schedule of Condition Report is to formally record the exact state of repair of a premises at the time when the new Tenant takes up occupancy. A Schedule of Condition can also include floor plan layouts to show the existing arrangement at the time of occupancy – so that the Tenant is not accused of making alterations – such as the removal or installation of internal walls that already existed when they took occupancy.
Without such a report, it is very difficult for the Tenant to later prove the condition that the building was in and they may therefore become liable for the cost of dilapidations and rectifying pre-existing disrepair when the Lease comes to an end.
Furthermore, if there were any areas of the building that were beginning to deteriorate when the Lease was taken up and these further deteriorate during the term of the Lease, the Tenant would usually be liable for the costs of these repairs also.
Depending on the type of building, the Tenant’s dilapidations liability may extend to areas that could incur significant costs, such as the roof, external wall cladding, heating systems or external grounds.
Although a fairly straightforward process, we are amazed how frequently this step of a Schedule of Condition is bypassed. Because of this, we are often left to try and defend huge dilapidations claims on behalf of outgoing Tenants.
Below are case studies of two small-medium sized Lancashire, which businesses demonstrate the importance of a Schedule of Condition:
Case Study 1 – Schedule of Condition
Lea Hough undertook a survey and prepared a Schedule of Condition on a 12,000ft² at the pre-lease stage on a printing facility in Preston for an ingoing Tenant. We identified that the building had a poor, neglected asbestos roof, and we advised that this would be a liability during the Lease term. Having flagged-up this issue, the Tenant was able to negotiate and ensure that the repairs to the roof became the Landlord’s responsibility – removing this substantial liability and saving a fortune.
Case Study 2 – Dilapidations Claim
Lea Hough acted for an outgoing Tenant (a haulage business) that received a dilapidations claim for £130k from their Landlord when vacating their former warehouse in Blackburn, at the end of a short duration Lease. Unfortunately, the Tenant had unfortunately not arranged for a Schedule of Condition to be prepared when their occupancy commenced. After a long running battle, with advice from our Chartered Surveyors, the matter was eventually settled at £30k – still a significant figure for most businesses to find!
For further information on how Lea Hough can assist clients with Schedules of Condition, Dilapidations Claims, break clauses, Pre-Lease advice and condition surveys of property prior to taking a Lease, contact us.BACK TO NEWS