As a tenant or landlord of a commercial property there are many conditions to agree to when leasing out or renting a building. The terms and conditions are normally contained within a commercial lease and are there to protect both parties from any issues that may arise during and at the end of a tenancy.
A Schedule of Condition and a Schedule of Dilapidations are two documents that you may have heard of when considering a commercial lease, but do you know what each document does, as they are very different from one another?
Cutting through the jargon, we explain the difference between a Schedule of Condition and a Schedule of Dilapidations and how each document can help both landlord and tenant during and at the end of a lease.
Schedule of Condition
A Schedule of Condition is a factual record of a property’s condition at the beginning of a tenancy. The document will normally be prepared in a written and photographic form and is generally prepared for the benefit of the tenant and at the tenant’s own expense, before the tenant takes occupation. However, a Schedule of Condition can be commissioned by the landlord or tenant, although whoever commissions the schedule, it must be agreed by both parties.
For a landlord, the Schedule of Condition will ensure that the property is returned at the end of the tenancy in the condition it was taken. For a tenant, it can reduce liabilities and obligations to repair and reinstate at the end of a lease, as a landlord will not be able to ask a tenant to make good a defect or damage caused before the tenant took occupation. In both cases, the record should limit the prospect of dispute during and at the end of the lease term.
Schedule of Dilapidations
A Schedule of Dilapidations is a document which itemises any items of disrepair within a building, that have occurred during a tenants’ occupation. The Schedule of Dilapidations is normally prepared and served on the tenant towards the end of a lease or after the lease has ended. It can also be compiled and presented as evidence to support an interim claim during the term of the lease, if a landlord feels that a tenant is failing to look after their property. This schedule is designed to identify breaches of a tenancy agreement in relation to items of disrepair and decoration, and will normally be costed, enabling the landlord to claim compensation to cover the costs incurred to return the building to its pre-let state.
The regulations supporting Schedules of Dilapidations are backed by the Property Litigation Association (PLA) Dilapidations Protocol and devised with input from the Royal Institute of Chartered Surveyors (RICS). The first draft of the Protocol was made in 2002. A Pre-Action Protocol however came into force on 1st January 2012 as a result of three years of work between the PLA, RICS and the Civil Justice Council. The Protocol provides a framework for dilapidation claims at the end of a lease and encourages the full exchange of early information and settlement of dispute out of court.
A Schedule of Dilapidations can often be a nasty and unwelcome surprise for a tenant, a fact that makes preparing a Schedule of Condition prior to the completion of a business lease important.
How can we help you?
In brief, if you are a tenant and the property you are considering taking is in less than perfect condition, you should consider having a Schedule of Condition attached to your lease to limit your repairing obligations when you vacate. If you are a Landlord and you are letting a property that is in good order, you might want to document this fact with a Schedule of Condition, so that there can be no argument at the end of the lease that the property was let in good order.
The law surrounding Schedules of Dilapidations and Condition is very complex. Landlords and tenants should therefore seek expert advice at an early stage. We act for landlords and tenants in the preparation of Interim or Terminal Schedules of Dilapidations and Schedules of Condition. Our specialists also defend claims and reduce tenants’ liabilities during the claims process. Based in Newcastle under Lyme, we are experts in dilapidations and regularly assist landlords and tenants throughout Staffordshire, Cheshire and Shropshire.
Call us today for further advice and support and to ensure that you protect your liabilities when either leasing or letting out a commercial building.