What Is a Schedule of Condition and When Do Commercial Tenants Need One

Signing a commercial lease without a schedule of condition is one of the most expensive mistakes a tenant can make. It usually goes unnoticed until the lease ends and a dilapidations claim arrives for defects that were there before you moved in.

A schedule of condition is a short, factual record of the state of a property at a fixed point in time. Prepared properly and attached to your lease, it sets a baseline that your repairing obligations are measured against. This guide explains what a schedule of condition is, what it should include, when you need one and how to make sure it actually protects you.

What a schedule of condition is

A schedule of condition is a written and photographic report that records the condition of a building, or part of a building, on a specific date. It is normally prepared by a building surveyor just before a lease is completed.

The report describes each element of the premises, from the roof and external walls to floors, ceilings, windows, doors and fixtures. Where there are defects such as cracking, damp staining, worn finishes or damaged fittings, they are described and photographed so there is no argument later about whether they existed on day one.

On its own, a schedule of condition is simply evidence. Its real value comes when the lease refers to it and limits the tenant’s repairing obligations to the condition it records.

Why tenants need one before signing a lease

Most commercial leases in London are full repairing leases. The tenant covenants to keep the premises in repair and to hand them back in that condition at the end of the term.

The courts have long held that a covenant to keep a property in repair includes an obligation to put it into repair first. This principle comes from Proudfoot v Hart (1890), which is still the leading case on the standard of repair in leases. If the building was in poor condition when you took it on, you could be liable to bring it up to a reasonable standard, even though you never caused the damage.

That is where a schedule of condition earns its fee. With the right lease wording, the tenant is not required to keep or return the premises in any better condition than the schedule shows. It draws a line under the pre-existing defects and turns a potential argument into a simple comparison of photographs.

Without that protection, responsibility for dilapidations at the end of the lease can extend to defects you inherited on the day you moved in.

When you need a schedule of condition

The most common trigger is the start of a new commercial lease, but there are several other points where a record of condition is worth commissioning.

Taking a new lease. This is the key moment. The schedule should be prepared shortly before completion so it is a fair reflection of the premises you are taking on.
Renewing a lease or taking an assignment. If you are taking over an existing lease, you may inherit the outgoing tenant’s liabilities. A schedule helps you understand what you are accepting and supports your negotiations.
Before carrying out alterations. If you are applying for a licence to alter, a record of condition before works start shows what was changed and what was already there.
Before neighbouring works. Where building work next door could affect your premises, a schedule gives you evidence if damage appears later. For works covered by the Party Wall etc. Act 1996, this is usually handled as part of the party wall process.
Landlords at the start of a letting. Landlords also benefit, because a clear record of condition makes it easier to show which defects arose during the term.

What a schedule of condition should include

A good schedule is detailed enough to settle a dispute several years later, when memories have faded and the people who signed the lease may have moved on. As a minimum, it should include the following.

The property address, the extent of the demised premises and the date of inspection.
A room-by-room or element-by-element description of condition, using consistent and neutral wording.
Clear, dated photographs cross-referenced to each entry, with a photo plan or marked-up floor plan showing where each image was taken.
External elements where the tenant has repairing obligations, such as the roof, gutters, walls and windows.
Building services and fixtures where they fall within the tenant’s repairing covenant.
Notes of anything that could not be inspected, such as locked areas or concealed voids.
A signature and date from both parties, confirming the schedule is agreed.

The level of detail should match the lease. A tenant of a whole building on a full repairing lease needs a far more thorough schedule than a tenant of a single floor with internal repairing obligations only. At the end of the term, a dilapidations survey will assess these same elements, and your schedule is the benchmark it will be measured against.

How to make sure the schedule protects you

A schedule of condition only protects you if it is tied into the lease properly. This is where many tenants fall short, because the survey is commissioned but the lease wording is never updated.

Reference it in the repairing covenant. The lease should state that the tenant is not obliged to put or keep the premises in any better condition than evidenced by the schedule of condition.
Attach it to the lease. The agreed schedule should be annexed to the completed lease, so there is one definitive version.
Get both parties to sign it. An unsigned or unagreed schedule is far weaker evidence if it is challenged.
Check the redecoration and yielding up clauses. Some leases limit the repair covenant but still require full redecoration or reinstatement at the end. Make sure the protection applies across all relevant clauses.
Keep your own copy of the photographs. Store the original images safely for the life of the lease, which may be 10 years or more.

Your solicitor handles the drafting, but your surveyor should review the lease clauses so the schedule’s scope matches the obligations you are signing up to.

Who prepares a schedule of condition and who pays

Because the schedule mainly benefits the tenant, it is usually the tenant who instructs and pays for it. It should be prepared by an independent, qualified building surveyor who understands how the document will be used in a later dilapidations negotiation.

The landlord or their surveyor will normally want to review and agree the schedule before it is attached to the lease. Instructing a qualified dilapidations surveyor at this stage pays off later, because they will record condition with a future claim in mind.

How much a schedule of condition costs

The cost depends mainly on the size and complexity of the premises, the extent of the tenant’s repairing obligations and how many photographs are needed. A single office floor with internal obligations only will cost far less than a whole building on a full repairing lease.

Whatever the fee, it is small compared with a disputed claim, where dilapidations costs can quickly build up through repairs, professional fees and loss of rent.

How a schedule of condition helps at the end of a lease

When the lease expires, the landlord’s surveyor will usually prepare a terminal schedule of dilapidations listing the alleged breaches of covenant. Without a schedule of condition, every historic defect is up for debate.

With one, the process becomes much simpler. Each item in the landlord’s claim can be checked against the original photographs, and any defect that was already recorded can be struck out. This is one of the most effective ways of avoiding dilapidations disputes early and it often shortens negotiations considerably.

A schedule of condition should not be confused with a building survey or a dilapidation survey. It is a factual record, not an assessment of liability or a pre-purchase condition report.

Common mistakes to avoid

Relying on a letting agent’s photos or an inventory that was never agreed or attached to the lease.
Commissioning the schedule months before completion, so it no longer reflects the premises you actually take.
Using vague descriptions such as “fair condition” without photographs to support them.
Forgetting areas outside the demise that the tenant is still responsible for, such as roofs or external walls.
Losing the original photographs over a long lease term.

Speak to a surveyor before you sign

A schedule of condition is one of the simplest and most cost effective ways to protect yourself from an unfair dilapidations claim. The key is to arrange it before the lease completes and to make sure the lease wording relies on it.

Fresson and Tee has been advising landlords and tenants across London on commercial leases and dilapidations for decades, from our office in Lincoln’s Inn Fields. We prepare schedules of condition for single floors, retail units and whole buildings, and we can review your lease clauses alongside your solicitor.

If you are about to take on new premises, contact our team on 020 7391 7100 or email surveyor@fandt.com to arrange an inspection.

FAQ Section

Is a schedule of condition legally binding?

A schedule of condition is evidence of condition, not a contract in its own right. It becomes binding in effect when the lease refers to it and limits the tenant’s repairing obligations to the condition it records, and when both parties have signed and attached it to the lease.

When should a schedule of condition be carried out?

Ideally within a few weeks of the lease completing, and after any landlord’s works are finished. If it is done too early, the premises may have changed by the time you move in.

Who pays for a schedule of condition?

The tenant usually pays, because the tenant gets most of the benefit. Landlords sometimes commission their own for new lettings or refurbished buildings.

What is the difference between a schedule of condition and a schedule of dilapidations?

A schedule of condition records the state of the premises at the start of a lease. A schedule of dilapidations is prepared during or at the end of the lease, lists the repairs the landlord says the tenant is liable for and forms the basis of a landlord’s dilapidations claim.

Can I get a schedule of condition after I have moved in?

Yes, but it is far less useful. The landlord is unlikely to agree to limit your obligations once the lease is signed, so the schedule may only serve as supporting evidence. It is always better to arrange one before completion.

Does a schedule of condition protect me against all dilapidations claims?

No. It protects you against defects that existed at the start of the lease. Other tenant dilapidations obligations still apply, including deterioration during the term, redecoration where the lease requires it and reinstating any alterations.