Schedules of condition in commercial leases have become commonplace. But how much protection do they offer? Commercial property lawyer Allan Sumner explains.
As the name suggests a schedule of condition is a factual record of the condition of a property. It’s most often prepared for inclusion in commercial leases.
Due to an increase in well advised tenants, schedules of condition have become a common inclusion within commercial leases over the last decade.
Business tenants with the foresight to seek a schedule of condition often find comfort in the simple existence of the document. However, without the advice from a property lawyer it is likely that tenants are unaware of how much protection this actually gives them.
It’s all in the wording
While a schedule of condition serves as evidence of the state of a property before a tenancy starts, the value of the document is reliant upon its inclusion within the lease and the way the covenant is worded.
The two phrases that are most commonly used to amend the standard repairing covenant are “no better condition” and “no worse condition”. These may seem to have the same meaning but the latter can lead to no limit of repair bills. To leave a property in ‘’no worse condition’’ suggests that as soon as the property falls below the recorded state tenants have an obligation to instigate relevant repairs. The terminology offers no upward limit as to where the liability to repair ends.
To leave a property in “no better condition” than the initial recorded state instantly provides a benchmark as to where the repair liability stops. Thus, offering more protection against unwanted repair bills.
Other similar wording may appear in the lease, such as “no worse or better condition”. This phrase can cause even more confusion and may even compromise the repair covenant.
A further phrase used is “keep in as good and substantial condition as evidenced in the schedule of condition”. This wording is often favoured as it emphasises the importance of ongoing maintenance to keep the property at the same standard as initially recorded.
Be aware of its limitations
There are of course limitations with using a schedule of condition. It cannot be a tool to avoid responsibility for repair and maintenance. If a tenant is required to leave the property in ‘’no better condition’’ and in reliance on that doesn’t carry out any work because the property was already in bad condition, they put themselves at considerable risk . It is likely that the tenant will become liable for this cost and the schedule of condition will not offer at best a limited safety net in this instance.
Get professional advice
Having a schedule of condition and the appropriate terms included within the repair covenant of a lease will offer tenants some protection from unwarranted and excessive bills. However, it is imperative that tenants exercise proactive maintenance throughout their agreement to protect themselves. As always, seek expert legal advice before signing any lease agreement.
Harrison Drury has a specialist property and construction team advising on a range of legal issues relating to commercial property. For more information please contact Allan Sumner on 01524 544237.