WHAT IS A SCHEDULE OF CONDITION?
A Schedule of Condition is a detailed recording of a properties condition which is usually retained to use at a future time to establish the previous condition of the premises. It is typically included within a Lease to limit Tenant’s repairing obligations to the condition of the property at Lease commencement.
A Schedule of Condition is sometimes prepared in a simple format, relying predominately on photographs and is known as a Photographic Schedule of Condition. This can be a cost effective way to produce s Schedule of Condition although they do have limitations in that they only rely on the visual image shown in each photograph. Unless carefully worded to include the areas not shown in the photograph, liability may not be limited and the photograph would not document issues such as movement, dampness, leaks, crack width or the extent of specific defects.
To fully record the condition of a building a text and photographic Schedule of Condition is recommended, also known as a Full Schedule of Condition. This would typically include a general description of a property, a detailed tabular schedule which would document the form of construction and condition of each building element, supported by a photographic record to give evidence.
To fully record all aspects of the property we sometimes prepare a video of the premises or include certain video elements of certain defects, for example to illustrate loose fixings, a dripping pipe or loose cladding. Specialist information can also be included in a schedule to fully record a buildings condition, for example a CCTV Survey of the underground drains, an electrical test report of the electrical system, an engineer’s report on the lifts etc.
HOW WOULD A ROOF BE INSPECTED?
Traditionally we would hire a mobile elevated work platform (MEWP) to inspect the roofs and upper elevations, sometimes known as a cherry picker. These allow detailed access to roof areas including a high-level view down onto roofs and a close up of specific issues. Where there is limited access we also utilise a combination of drone photography and elevational pole photography to gain close up views of a property. We consider it is essential to view a roof at close hand as roofs are often one of the main liabilities under a Lease.
WHEN ELSE IS A SCHEDULE OF CONDITION NEEDED?
In addition to inclusion within a Lease, we also prepare Schedules of Condition for a variety of purposes, for example inclusion into a Party Wall Award to clearly document the condition of a neighbouring property before works progress.
WHAT IS A CONDITION SURVEY?
There is often confusion between a Schedule of Condition and a Condition Survey. The main differences are that a Schedule of Condition is purely a record of the condition of the building to be appended to an Agreement whilst a Condition Survey is prepared to not only show the condition of the building but identify works required, usually with costs to assist in planning maintenance works which may be needed. There is also sometimes confusion between a Schedule of Dilapidations and a Schedule of Condition, a Schedule of Dilapidations is something prepared during or at the end of the Lease to show the breaches in a Lease Agreement.
DOES A SCHEDULE OF CONDITION AVOID FUTURE LEASE LIABILITY?
Unless a Lease is very carefully worded and there is a comprehensive Schedule of Condition appended, then a Tenant’s Liability is unlikely to be fully limited by appending a Schedule of Condition. People often assume that as the building further deteriorates they would not be liable for such further deterioration. As it is very difficult to put an element back into a partly repaired state, there has been much debate in many Dilapidation cases law over a Tenant’s obligation to then put the element back into full repair. Similarly, it is difficult to record every single part of a building in a schedule and unless a photograph is agreed to be illustrative of all areas then areas not shown in a photograph or referenced in the text could carry a liability. It is therefore important to carefully word the repairing covenant with the Lease to agree the standard of repair agreed by both Landlord and Tenant, and establish who is responsible for any further deterioration which occurs after Lease commencement.
IS A SCHEDULE OF CONDITION ONLY PART OF THE EVIDENCE?
There is often debate over whether a Schedule of Condition is the only limitation on the extent of repair. This is dependent upon the exact wording of the Lease and it is important to check whether the standard of repair is limited to ‘the standard on Lease commencement, as further evidenced by a Schedule of Condition’ or whether the standard of repair is limited ‘to the Schedule of Condition’. Although similar in wording, there can be a difference and in some cases the intention may have only been to incorporate a Schedule to limit a certain defect, eg an uneven floor or an out of line wall. It is therefore important to carefully read the wording of each Lease.
DOES THE SCHEDULE HAVE TO BE IN THE LEASE?
It is important to ensure the Schedule of Condition is referenced in the legal agreement and not simply held on file. It is often thought that by simply having some photographs on file these can be used to reduce a Tenant’s liability under the term. If they are not specifically referenced in the Lease and the Lease is held on standard full repairing terms, then it is unlikely they would limit a Tenant’s obligation and the Tenant could be liable for putting the property into repair, even if it was clearly in disrepair at the start of the Lease. This is why it is important to obtain specialist advice from a Chartered Building Surveyor when taking any Lease and even if on the face of it, it seems a fairly straight forward process to take a few photographs, our knowledge of the potential claim at the end of a Lease will help reduce your liability.
SALE AND LEASE BACK AGREEMENTS
We regularly act for a variety of clients who are undertaking a sale-and-leaseback arrangement of their portfolio to release the equity in their business. This is sometimes undertaken when the freehold premises are sold to an investor, and in some cases an operational company may be disposed of and the vendor may retain the freehold as an investment. In these cases, there is often a requirement to undertake numerous surveys and prepare Schedules of Condition within a tight time frame and to include other elements of due diligence to ensure the overall business transaction is not delayed.
A testimonial from one of our Condition Survey clients
“I feel fortunate to have found find Bradley-Mason LLP. I was searching online for a quality but cost effective property partner, with national coverage, and sharing my companies ambition to grow quickly. They have proved over the last twelve months to be a trusted and quality supplier, very responsive to our requirements and that of our clients. They produce high quality reports, efficiently and without fuss and they have always put themselves out when I have needed to change the plan at short notice. I hope you find yourself lucky to have found them too”
Steve Christie – Portman Dental