A Schedule of Condition records the condition of a building or other property, normally for legal or contractual reasons. Lease Repairing Covenants. When commercial or residential property is let the lease or tenancy agreement sets out the responsibilities of the lessor and the lessee.
The function of a schedule of condition is “evidential”. The schedule may be any, or a combination of:
Consequently, a schedule of condition that refers to non-written forms of evidence may incorporate by reference media such as CDs, DVDs or links to extranets.
The practical purpose of a Schedule of Condition may not be to prescribe the precise state of repair that the tenant is required, in reality, to achieve. Indeed, it may be virtually impossible to replicate the state evidenced by the Schedule if, for example, the premises are decorated.
Rather, the Schedule of Condition provides a basis for negotiation of any sums payable by the tenant at the end of the term to settle the landlord’s claim for damages for dilapidations. Any such claim is subject to the statutory cap on damages imposed by Landlord and Tenant Act.
Evidence contained in a Schedule of Condition may indicate that the premises have been left in at least the state required, in which case damages might be zero. Alternatively, the premises may be in a significantly worse state, in which case the Schedule of Condition provides evidence of the extent to which damage to the value of the landlord’s reversion is attributable to the tenant’s default. The landlord could not claim, even as a starting point, the whole cost of repair. However, the Schedule of Condition provides evidence to inform negotiations concerning the proportion of those costs that ought to be payable by the tenant.
Commercial leases usually require the tenant to repair the property covered by the lease. Many leases include an obligation to “put and keep” the premises in repair. In some cases, a “put and keep” obligation might require an incoming tenant to carry out works to bring the premises up to a standard of repair that would objectively be considered appropriate for properties of the type and age, and in the location of the actual property. This represents a departure from the underlying rule that a tenant’s obligation to repair bites only where there is some deterioration or falling away from a previous (better) state of repair. The effect of a “put and keep” obligation can be to require a tenant to improve premises.
The same result can flow from an obligation to “keep” the premises in repair if it is arguable that the premises must be brought up to the appropriate standard before they can be “kept” in that state.
Faced with a potential liability to improve premises, tenants may negotiate a less onerous repairing covenant, excluding any obligation to improve the premises at the outset. That concession is often worded as a proviso to the repairing covenant, along the lines of:
““Provided that the Tenant is not obliged to put or keep the Premises in any better state or condition than at the date of this Lease, as evidenced by the Schedule of Condition””
A landlord may prepare a schedule of dilapidations, itemising the ways in which the tenant’s failure to repair in accordance with the lease has diminished the value of the landlord’s reversion.