The Schedule of Condition Most Tenants Never Ask For
A café owner I worked with took a unit on a five-year lease. Ground floor, decent street, rent she could afford. The roof had been leaking on and off for years before she arrived, and the previous tenant had left a set of ceiling stains as evidence of it.
She noticed. She mentioned it to the agent. The agent said not to worry about it.
At the end of the lease she was presented with a claim that included a full roof covering renewal. Not a repair to the damage caused during her occupation. The whole roof, on a building that had been failing since before she signed anything.
She paid most of it. She had no reason not to, because her lease said she would.
The sentence that catches almost everyone
Most commercial leases in the UK are granted on full repairing and insuring terms, which means the tenant carries the cost of maintaining the building rather than the landlord.
The wording usually obliges the tenant to keep the premises in repair. That sounds reasonable until you learn how the courts read it. An obligation to keep a property in repair has long been held to include an obligation to put it into repair first, even where the disrepair was there on the day you moved in and had nothing whatever to do with you.
Read that again, because it is the single most expensive thing a commercial tenant can fail to understand. Unless the lease says otherwise, you can inherit a building in poor condition, use it carefully for five years, and still owe money to bring it up to a standard it was never in while you were there.
A schedule of conditions is how you say otherwise.
What a schedule of condition actually is
A schedule of condition is a dated record of a property’s state at a fixed point in time, normally just before a lease begins. A surveyor inspects the premises and produces a schedule of condition report combining written descriptions with extensive photographs. Every crack, stain, worn floor covering, rusted fixing, failing seal and patch of damp is recorded.
It is deliberately unglamorous. It is a photograph album with captions, and it is worth more than almost any other document you will sign that month.
The condition schedule is then attached to the lease as an annexe, and the repairing covenant is amended so that your obligation is limited by reference to it. You are no longer required to hand the building back in good repair. You are required to hand it back in no worse condition than the schedule records.
That single change can remove tens of thousands of pounds of liability at lease end, and it can be agreed for the price of a morning’s work.
The mistake that makes it worthless
Here is where a lot of tenants come unstuck, and it is worth reading twice.
The schedule of the condition survey on its own does nothing.
I have seen tenants pay for a beautifully prepared property condition report, file it neatly, and discover five years later that it has no legal effect whatsoever, because nobody amended the lease to refer to it. An unattached schedule is just a set of photographs. It is not a limitation on anything.
The document only works when your solicitor varies the repairing covenant to say your obligation is qualified by reference to the annexed schedule, and the landlord agrees to that wording. Getting the survey without getting the lease amendment is like buying insurance and never sending the form back.
Ask your solicitor to confirm in writing that the covenant has been qualified. It takes one email.
What separates a good one from a useless one
Not every schedule of condition survey is worth having, and the difference shows up years later when somebody is arguing over it.
A weak schedule contains twenty general photographs and a paragraph saying the property is in fair condition for its age. That helps nobody. Fair condition is an opinion, and opinions are exactly what you are trying to remove from the conversation.
A strong one is exhaustive and specific. It works through the building element by element, photographs each defect close enough to see it and wide enough to place it, and describes what is shown in plain terms rather than in surveying shorthand. It covers the parts nobody thinks about until they cost money, including the roof coverings, rainwater goods, the condition of the shopfront or glazing, floor finishes, and the state of the mechanical and electrical services.
It is also dated, and ideally acknowledged by both parties, so that neither side can later suggest the photographs came from somewhere else.
Ask to see a sample before you instruct anyone. A surveyor who produces thorough schedules will be pleased to show you one. A surveyor who does not will find a reason why they cannot.
Timing is not flexible
You have leverage before you sign and almost none afterwards.
Once the lease is completed, a landlord has no reason at all to agree to limit your repairing obligation, and will not. The building condition survey has to be carried out and the wording agreed while the terms are still being negotiated, which in practice means raising it at heads of terms rather than three days before completion.
If you are already in occupation without one, it is not entirely hopeless. A record of current condition is still useful evidence at a lease renewal or a rent review, and it gives you a baseline for any later dispute. It just will not do the heavy lifting that a properly annexed schedule would have done.
The other kind, which does a different job
Confusingly, the same phrase describes a second and unrelated exercise.
A party wall schedule of conditions is prepared under the Party Wall etc. Act 1996, and it records the state of a neighbouring owner’s property before construction work starts nearby. Its purpose is to settle arguments about whether the crack in next door’s plaster was caused by your excavation or was already there. Different statute, different parties, same underlying principle, which is that a dated photographic record beats two people’s memories every time.
Developers and their neighbours both benefit from one. Neither tends to think of it until the complaint arrives.
What it costs against what it saves
I will not quote figures, because they depend entirely on the size and complexity of the building and any surveyor promising a fixed price without seeing the premises is guessing.
What I will say is this. In more than a decade of acting on lease-end claims, I have never once seen a schedule of condition cost more than the liability it removed. Not once. The economics are not close, which makes it genuinely strange how few tenants commission one.
The reason is not cost. It is timing. Heads of terms is the most optimistic moment in any tenancy, everyone is focused on rent-free periods and break clauses, and nobody wants to talk about the state of the roof.
That is exactly when you should.
If you take one thing from this
Before you sign a commercial lease, ask your solicitor a single question. Is my repairing obligation limited by reference to a schedule of condition?
If the answer is no, instruct a schedule of condition surveyor before you commit. If the answer is yes, ask to see the wording and check the photographs actually cover the parts of the building you are worried about.
Five years from now it will be the cheapest decision you made.
FAQs
What is a schedule of condition?
A schedule of condition is a written and photographic record of a property’s state at a specific date, usually taken just before a lease begins. Attached to the lease and referenced in the repairing covenant, it limits the tenant’s obligation to returning the building in no worse condition than the record shows.
Is a schedule of condition legally binding?
Only if the lease says so. The document has no effect by itself. The repairing covenant must be qualified by reference to the annexed schedule, which is a drafting matter for your solicitor.
Who pays for a schedule of condition?
Usually the tenant, since the tenant is the party being protected. It is occasionally shared where both sides want the record, and a landlord may commission one to establish a baseline before a new tenancy.
How long does it take to prepare?
The inspection typically takes a few hours for a small unit and up to a day or more for a larger building. The written condition report normally follows within one to two weeks. Allow time for your solicitor to agree the wording as well.
Can I get one after I have signed the lease?
You can commission the survey, but it will not limit your repairing obligation, because that is fixed by the lease you have already signed. It may still assist at renewal or in a later dispute.
Does a schedule of condition stop a dilapidations claim?
It does not stop one, but it substantially narrows what can be claimed. The landlord can still pursue disrepair that went beyond the recorded condition, and damages remain subject to the statutory cap in Section 18(1) of the Landlord and Tenant Act 1927.
About the author
Dave MacMillan MRICS is a chartered building surveyor at ASG Consulting, a RICS-regulated practice in Liverpool. He prepares schedules of condition and acts on dilapidations claims for commercial landlords and tenants across Merseyside, Cheshire, Manchester and the North West.