If buying a Commercial Property, you will want a Building Survey. If renting or leasing (either Landlord or Tenant) you will need a Schedule Of Condition and at the end of the lease or tenancy a Schedule Of Dilapidation and Terminal Schedule.
Dilapidations refers to disrepair of a property, where there is a legal liability for the condition of disrepair. Usually this liability is described within the lease between the landlord and the tenant.
If the property is in a poor state of repair but the tenant may agree to execute repairs in exchange for a reduced rent or a deferred rent review. If so a precise list usually in the form of a "Schedule of Dilapidations" should be incorporated in the Lease, in the interest of certainty.
In other cases, particularly where the premises comprise an older building, the in-going tenants repairing obligation should be limited to preserving the state of repair at the commencement of the Lease term, subject to decoration. This is to ensure that at the termination of the Lease the tenant is not obliged to give back the premises in a better state of repair than they were in the commencement of the Lease. Best practice involves a surveyor preparing a "Schedule of Condition", this being agreed with the landlord or his surveyor and then incorporated in the Lease.
During a lease the landlord may require the preparation of a "schedule of wants of repair". This may be served as an interim schedule (in effect a list of defects needing to be remedied) or as a full schedule detailing serious items of disrepair. The latter is with the intention either of forcing the tenant to carry out the remedial works or of regaining possession of the premises and obtaining the cost of repair in the form of damages from the tenant. Modern leases often reserve the right of the landlord to re-enter premises, carry out the work himself and then seek to recover costs.
During a lease the likely level of damages in respect of disrepair will usually be assessed on the basis of the diminution in the value of the landlord's reversion as a result of the want of repair i.e. the difference in the value of the premises left unrepaired and their value if the repairing obligations had been performed.
Toward or at the end of the lease it is normal for landlords to have a Terminal Schedule of Dilapidations drawn up and submitted to the tenant. If the schedule is drawn up prior to the end of the lease there is a greater chance that the repairs will be carried out and that the premises will be in adequate condition for re-letting at the end of the term. During the lease the tenant still has a vested interest in the premises and this frequently encourages him to carry out the necessary remedial works. By the end of the lease the tenant's options are drastically reduced as the tenant usually has no right to remain in occupation and therefore no right to carry out the work. In these circumstances the tenant's only option is to make a payment based on the damage which has been occasioned to the property.
Where the term has ended the measure of damages is likely to be the lesser of (a) cost of repairs or (b) the difference in the value of the premises in its actual condition and its condition if the tenant had complied with his repairing covenant, plus reasonable consequential damages such as loss due to delay in selling or re-letting the property caused by making good the tenant's default. A surveyor will be responsible for preparing an estimate of the cost of the remedial work in order to assist with computation of any claim for damages.
Break options in leases have become more common in recent times. However, these options are nearly always dependent on tenants complying with all their lease obligations, including the repair covenants, up to the relevant date. Apparently some landlords have been able to successfully refuse breaks on the basis that the repairing covenants have not been fully complied with. A nasty shock for the tenants concerned.
If you require a Schedule of Condition, Dilapidation, Interim or Terminal Schedule please speak now with one of our expert Chartered Surveyors about your requirements.