A schedule of condition on a commercial lease: what it does, and what it doesn't

Most commercial leases put the repairing obligation on the tenant. A full repairing lease can require the tenant to hand the unit back in good repair regardless of the state it was in when they took it, which on an older building can mean paying to improve something they never damaged. A schedule of condition is the document that stops that happening.

Why the solicitor asks for it

The schedule only works if the lease refers to it. A typical clause says the tenant is not obliged to put the premises into any better state of repair than that evidenced by the schedule of condition annexed. That one sentence is what caps the liability, which is why the tenant's solicitor will usually be the one to ask for the schedule before completion and why it has to exist, and be agreed, before the lease is signed.

For a landlord, the schedule is equally useful. Without one, the tenant's argument at lease end is that the unit was already in poor condition when they took it, and there is nothing to say otherwise.

What it contains

• Every area of the demise: sales floor, back of house, WCs, stores, plant, external elevations that fall within the tenant's repairing obligation, roof if included, yard and boundaries.
• Element by element within each area: floor, walls, ceiling, doors, glazing, shopfront, services as visible, fixtures the tenant inherits.
• A plain description of condition per element, with a dated and numbered photograph for each. On a shop unit that usually means several hundred photographs.
• Meter readings, keys and any alarm or shutter tests on the front page.
• A note of what was not accessible or not inspected, so nobody later reads an omission as a clean bill.

What an interim inspection and an exit record add

An interim inspection is a periodic walk of the unit during the term, usually annual, to check the tenant is keeping to the repairing covenants and to record anything that has changed. Landlords who never look until the last month are the ones who end up in a dispute they cannot evidence.

An exit record is the unit walked again at lease end, against the original schedule, with changes appended. It gives both sides a factual starting point for the end-of-lease discussion, and gives the building surveyor or solicitor who deals with dilapidations something reliable to work from.

What it is not

A schedule of condition records condition. A schedule of dilapidations, sometimes called a dilapidations survey, is a different document: it names breaches of the lease, cites the clauses, and prices the remedy as a claim. That is building surveyor and solicitor work, governed by the Dilapidations Protocol, and it is not what we do. We supply the factual record the claim is built on and defended against. We do not draft the lease, advise on the clause, or value the claim.

A note on vacant units

Between tenants, most unoccupied-property insurance carries an inspection condition: the unit must be visited at a set interval, often every seven to thirty days, and the visits logged. Miss the interval and the insurer can decline a claim. A vacant property round records security, water, heating, signs of entry and damage on each visit, dated and photographed, so the log exists. See the commercial ladder for how the four documents fit together.