It is not unusual for commercial leases to state that a tenant must ‘put and keep their demised premises in good repair and condition’. This covenant can require the tenant to leave the premises in a better condition than at the start of the tenancy, potentially exposing them to unexpected costly repairs.
When leases contain this covenant, the landlord can serve a notice, called a schedule of dilapidations, both during and at the end of the term of the lease, listing items that are in disrepair and requiring the tenant to rectify them. Often the cost of carrying out the required works to bring the condition of the premises up to the level required in the lease can be significant.
There is also a risk that the landlord could look to bring a dilapidations claim after the lease expires if the property is handed back in a condition that does not comply with the tenant covenant.
A dilapidations claim is essentially a damages claim against the tenant, designed to compensate the landlord for any loss. Damages are limited to the diminution in value the landlord has suffered by the tenant failing to comply with the repairing covenants in the lease, but the costs claimed are often significant.
To minimise the risk to tenants, it is becoming more common to limit the repair covenant in the lease by agreeing a schedule of condition.
A schedule of condition is essentially a report, which documents the state of repair and condition of the premises when they are first occupied by the tenant.
The schedule is attached to the lease and the repair covenant is amended so that the tenant is not required to put or keep the premises in any better state of repair than that set out in the schedule of condition.
We advise that a schedule of condition is prepared by a surveyor as the more comprehensive the report, the more likely it will benefit the tenant in the future, avoiding the need for a schedule of dilapidations or a potential dilapidations claim.
A surveyor will document the property in detail including a number of photographs of the premises and full descriptions of property condition.
For tenants, a schedule of condition can provide great peace of mind that they can’t be held responsible for repairs that are above and beyond those required to return the property in its original condition.
If you have any queries regarding a lease that you are looking to enter into or if you require advice on any commercial property matter, whether as a landlord or tenant, call 01782 205000 or email firstname.lastname@example.org