The importance of a schedule of condition in dilapidation disputes

Dilapidations disputes may arise where the tenant fails to comply with certain obligations within the lease (a breach of covenant), during or at expiry of a commercial lease. The majority of business premises in the UK are let on full repairing and insuring leases. This installs liability onto the tenant for all repairs required to keep and put the premises in good condition.

A commercial tenant should seek to limit their exposure to the repairing obligations contained within the lease and to take necessary steps to avoid inheriting the disrepair left by preceding tenants.

A schedule of condition is used to record the condition of the property at a particular moment in time typically at the commencement of a lease and should consist of descriptive text and supporting photographs. It must be referred to in the lease, so that it may be used as evidence when negotiating a dilapidations claim to limit the repairing liability. It is recommended that a chartered building surveyor completes the schedule of condition with view of the repairing obligations. A poorly drafted or vague schedule of condition that is not referred to in the lease is often not useful in a dilapidation negotiation and can be dismissed by the opposing party.

From a schedule of condition the tenant’s solicitor can advise and negotiate the repairing obligations in a lease by altering the covenants from such wording as to keep or put in good and substantial condition, by adding a line to limit this obligations to ‘“no better condition than evidenced in the Schedule” or similar.

By limiting the repairing obligation by the way of a schedule of condition and subsequent reference in the lease, this could prevent the tenant from being obliged to return a property into a better condition than they potentially inherited at the start of the lease, which could have significant financial implications. Therefore, the cost of an initial schedule of condition is more than worthwhile.

Crossley Anderson’s team is regulated by the Royal Institute of Chartered Surveyors and have significant experience negotiating dilapidations disputes for both Landlords and Tenants.

For further information on the suitability of a schedule of condition or help with a dilapidations matter please contact our friendly team.