Beware - it can often be a very scary surprise for any occupier to realise quite what they have signed up for.
Most occupiers, when taking on a lease, anticipate the need to pay rent, rates and maybe some service charge and are very excited to fit-out the new premises and begin to trade, without thinking of the other 95% of the lease clauses that they have just signed up to.
What is a Full Repairing Lease?
In the majority of cases an occupier will be taking what is known as a full repairing responsibility which is normally worded in various ways which include put and keep in repair, keep in good and substantial repair and condition, the list goes on. The most important part of this is that they all generically mean the same thing. Irrespective of the condition you take the property in, you have to put and keep it in repair. If I had a penny for every time an occupier has commented that ‘it was like that when I took the property’. If you have taken a full repairing and insuring lease on a property with a large hole in the roof, unfortunately it is your responsibility to repair it.
I have dealt with this from both a landlord and also an occupier side, and it is such a shame and usually a very scary surprise for any occupier to realise quite what they have signed up for. What normally follows is hefty dilapidations claim from a landlord at expiry which in some cases causes sleepless nights and can unfortunately cause businesses to fail.
Can a Schedule of Condition help?
Now it isn’t all doom and gloom and a lot of people have now started to turn towards what they think is the silver bullet, the good old schedule of condition, but does it really do what it needs to?
The first question that should be asked is whether a photographic or worded schedule is required. We all know a picture paints a thousand words, but words in a worded schedule are generally underrated and I would highly recommend the importance of having both – words and photographs - within any schedule. It is all well and good having a photo of the carpet but does the photo show if it is good or fair condition? Now once you have your schedule of condition, this has to be mentioned in the lease. If it isn’t then it is worthless and I have seen it missed in many drafted leases.
A schedule of condition is supposed to be a cap on a occupier’s repairing obligation so please make sure the wording states as such. On multiple occasions, I have ended up in arguments with landlords and solicitors regarding whether the building should be kept in no better state or no worse state than the schedule of condition.
Everyone just expects the schedule of condition to be commented on within the repairing obligation however, should it be mentioned in other lease covenants? Decoration, Yield up? Statutory compliance? Many times, the occupier has commented that they have a schedule of condition and therefore there are no dilapidations, to find out they are still liable for decoration, which can be a significant cost, because the schedule of condition limits their repairing obligation but makes no mention of their decoration obligation.
Raise the roof!
It should also be mentioned it is all well and good having a schedule of condition on a lease, but do you really want to take responsibility for a roof where you are not required to put it in a better condition, but the landlord is also not obligated to do any works to the roof either. What happens if it leaks? You would obviously do the works anyway and incur the cost and the schedule of condition hasn’t limited your liability.
Mitigate nasty surprises.
It is interesting that I have worked in commercial property for over fifteen years, and it still concerns and surprises me the amount of occupiers I have dealt with who do not understand the liability they are taking on when they sign up to a full repairing and insuring lease. This is no slight on the occupier as they only look at a lease once every 10-15 years whereas surveyors and solicitors look at them on a daily basis.
In summary, it is important to take good advice prior to taking on any commercial property and Jaggard Macland are very able to assist at any point even when you have received a large dilapidations claim. We have specialists in leasehold acquisitions, building surveys, schedules of condition and dilapidations and we would be pleased to discuss with you, any issues you have upcoming.
MRICS, Registered Valuer
HEAD OF COMMERCIAL PROPERTY. PARTNER.