Understanding schedules of condition before signing a commercial property lease
Before you put pen to paper and sign your commercial lease you will have done lots of research; location, size, suitability of the building etc. But one thing you may have overlooked is a Schedule of Condition. We look at what it is and just how important it is that you understand all its implications.
What is a Schedule of Condition?
A Schedule of Condition (SoC) is simply a detailed record of a comprehensive examination of the building or premises you are intending to lease. A fully-qualified surveyor will examine the building and record his or her findings about such things as:
- its location
- what materials the property is constructed of
- the time, date and weather on the day of inspection
- the reason for the SoC
- any architectural drawings of the property, perhaps accompanied by photographs and videos
- a full description of each item inspected (and its location), both internally and externally, including its condition. This will cover holes, cracks, staining, damp, decay, discolouration and any other deterioration or disrepair
- any tests that have been carried out.
Why is a SoC needed?
A SoC is an important form of protection for both landlord and tenant. It identifies any repairs which need to be made before the tenancy is agreed and sets a benchmark against which the property can be assessed in future.
Why is it important?
When you sign a commercial lease there is the possibility that, written into its clauses, is a liability to repair the building. This means that you are obligated to leave it in a better condition than when you started the tenancy, and can include expensive repairs such as replacing the roof, for example. It can be a costly and stressful exercise at the end of a tenancy when you are ready to move on for whatever reason. It’s in your own best interests, therefore, to make certain that the condition of property is recorded in detail so that you can identify any problem areas before they need attention.
This can benefit you in two ways; firstly, if you are made aware of any problems, you stand in a stronger position to negotiate the lease with the landlord, and perhaps agree on less rent or a longer lease, should you want it. Secondly, you can refer to the document at the end of the lease to demonstrate the extent or otherwise of any dilapidations or reinstatements that the landlord may require.
Think of a schedule of condition as an insurance document for you, as a tenant. It means that you can’t be held responsible for repairs which are the landlord’s responsibility (before you sign) and that you can prove that you have reinstated the building to its original condition before you leave. If you need any advice on obtaining a SoC or placing its contents into context within a business lease, talk to one of our team. Our RICS-qualified surveyors can advise you on all aspects of commissioning one before you sign and its impact at the end of your lease.
Written by: Steven Jones on Thursday 31/03/2016