What is a schedule of condition?
This is report on the condition of a property (or piece of land) usually at the outset of a lease, licence, testing or construction.
What does a schedule of condition do?
For a commercial property lease, the expectation is that it will be on a full repairing and insuring basis (“FRI Lease”), meaning that the tenant will be responsible for keeping the property in good and substantial repair. If this property is an existing one, perhaps previously used and leased to third parties, a tenant under a FRI Lease may be required to put the property into a better condition than it was at the outset
For some development options/agreements or construction works, access to complete site testing will usually include an obligation on the developer to reinstate the land on completion of their works.
What does it look like?
There is no prescribed style for a Schedule of Condition and it will often depend on what it is being used for, the potential value of the transaction or potential liability, and the advice of surveyors. Some of the most helpful content of any schedule of condition can be the visual documentation – photographs, drawings, and sometimes videos, the visually record the condition of each inspected part. There is often a detailed written description of the property, general condition, any materials, descriptions for each photograph, plan or drawing and any existing wants of repair that have been identified.
Benefits of Schedule of Condition
For a tenant, one benefit of a Schedule of Condition can limit the repairing obligations of the tenant by limiting it to repairs necessary to maintain the property in the same condition as when this took it on.
For a landlord, a Schedule of Condition can assist in any dispute concerning the tenant’s repairing obligations either during the term of the lease or on termination. It can be used to support any claim for dilapidations.
For a landowner agreeing to site investigations, a Schedule of Condition can ensure that the land is reinstated to the original condition.
A schedule of condition can reduce disputes, give clarity to each party as to the condition at the outset and the repairing standard required.
Points to Consider
It is not a legal obligation so if you wish to benefit from a Schedule of Condition it is important to agree that when negotiating the terms of any agreement and not assume that the other party will agree this.
Although a landlord may feel that a repairing obligation being qualified by reference to a Schedule of Condition may have a downside, a Schedule of Condition should help reduce disputes on condition/repair to ensure that the property is either handed back in the appropriate condition or that a claim for dilapidations is easier to resolve by reference to the Schedule of Condition being a record at our the property at the outset of the lease.
If a property is new or in good condition at the outset of any lease so that the tenant’s potential repair is already minimised, a Schedule of Condition may not be appropriate.
Who prepares a schedule of condition?
These are usually prepared by surveyors and instructed by a tenant or third party working on the property for site investigations or completing works.
Practical aspects (annexed and signed, referred to)
Depending on the size of the Schedule of Condition and whether any videos are included, it is preferable to annex a Schedule of Condition to the agreement that refers to it. Where that is not possible, it is usually included by reference setting out who produced this, the date, any reference and that each party has retained a copy.
If it is to be annexed to the agreement then each party will need to sign every page where a photograph, drawing or plan appears.
