Why a schedule of condition matters

For a tenant taking a leasehold interest of premises, one of its most onerous liabilities is the obligation to repair them.

All leases are designed from the starting point of being on Fully Repairing and Insuring “FRI” terms. This means the tenant is responsible for putting and keeping the premises in good and substantial repair. This applies irrespective of the state and condition at the start of the lease.

The “putting” element is often not expressly stated in the repairing clause itself but is inferred and the argument that “it was like that when the lease started” is irrelevant. The cost of full compliance with the clause is often only felt at the end of the lease, when compliance forms the basis of the tenant’s dilapidations obligations when exiting the arrangement.

Limiting the extent of this repairing obligation can, if negotiated early on, assist a tenant in mitigating this liability. This is often appropriate where the premises are not newly constructed or refurbished.

The lease can provide that the tenant is not required to keep the premises in any better condition than the condition on entry into the lease. The intent is clear, but questions can arise on how to record it. This is when a schedule of condition is often used. A schedule of condition is a photographic schedule of the premises, recording the condition in detail and establishing how the premises are to be maintained and also returned to the landlord at the end of the lease. A schedule is considered good evidence of condition and can also limit the extent of potential disputes at the end of the lease, however there are a couple of questions to ask and potential pitfalls for a tenant to be aware of.

1. Is the schedule detailed enough? Does it record all areas where the premises are potentially less than in good and substantial repair?
   If a photograph cannot accurately record the issue, it should be supplemented with text.
2. Does the schedule cover all of the premises?
   Premises definitions can often include pipes, cables, drains benefiting the premises, in addition to the more obvious buildings and yard areas. But these may not be accessible or photographable and therefore not shown with photographs alone. If an area is not shown in the schedule, then it is assumed that it is a good and substantial repair and the full repairing obligation can apply to these by default.
3. What medium should the schedule be in?
   A photographic schedule, printed and attached to the hardcopy lease was the favoured method, but with electronically signed documents, the size of the data can make this inappropriate. A detailed comprehensive schedule can be data heavy. It could be a referred to document, providing that it is always available and its media is durable. There was a phase in the 90s where video schedules of condition were referred to, however VHS recordings often degraded as the detail of these schedules was not necessary to be reviewed until some 15 or more years later.

A schedule should be available at the point the lease is completed. Seeking to agree a schedule after completion of the lease can create issues for both a landlord and a tenant, but the risk to the tenant is that the schedule is never created and/or agreed and a full repairing obligation applies as the default obligation.  

It can be agreed that specific areas of the premises are excluded from the tenant’s repairing obligations, but here the importance is to ensure that someone is obliged to then keep it in repair as by simply excluding it without a positive obligation on another to keep in repair could result in no one being required to keep in repair/maintain and ultimately the tenant would face the interruption to the use and enjoyment of the premises, having to deal with the consequences with no recourse available.

The Birketts view

In summary, a well‑prepared schedule of condition is a practical and often essential tool for any tenant seeking to manage and contain repairing risk under a commercial lease. Used properly, it provides clarity, reduces ambiguity and can significantly limit exposure to dilapidations at lease end. However, its effectiveness depends entirely on its quality, scope and the timing of its agreement. Tenants should therefore ensure that the schedule is comprehensive, accurately reflects the full extent of the premises, and is formally incorporated into the lease at completion. Equally, landlords benefit from the certainty it brings in setting clear expectations for maintenance throughout the term.

As ever, early legal input is key. Addressing repairing obligations and the need for a schedule of condition at the heads‑of‑terms stage will help avoid disputes later and ensure both parties enter the lease fully aware of their respective responsibilities. A modest investment at the outset can pay dividends over the lifetime of the lease – reducing risk, protecting occupational continuity and supporting a more collaborative landlord‑tenant relationship.