INTRODUCTION TO SCHEDULES OF CONDITION
A schedule of condition (SOC) is a factual record of the condition of a property, normally prepared for legal or contractual reasons. Schedules of condition can be prepared for either residential or commercial buildings.
They create a complete record of the condition of the property on a particular date that can be used as a benchmark against which its condition can be assessed in the future and any damage/changes can be identified.
Schedules of condition may be prepared under the instruction of a landlord, a tenant, a contractor, or a neighbour. Appointing an independent expert to prepare a schedule of condition should help to give it greater weight if there are subsequent claims or negotiations. It may be beneficial to seek agreement of the other party that the schedule is a fair reflection of the condition of the property when it is prepared.
PARTY WALL
There is no mention of a schedule of condition in the Party Wall etc Act 1996, however it is usually included in Party Wall Awards as it is a detailed record of the condition of a neighbouring property before building works commences next door.
Then if there are defects the schedule of condition can be checked at the end of the building work to establish if the damage has occurred due to the works.
COMMERCIAL LEASES
A Schedule of Condition at the start of a commercial lease is the most effective way of limiting future dilapidations liability.
Repairing obligations in Leases varies significantly and the liability is of critical importance. A lease is a binding contract and fully understanding the terms of the lease is the first step in understanding likely future repair liabilities.
Most leases divide the tenant’s obligations into repair, redecoration, alterations and removal of tenant’s goods. If there is what is often referred to as a full repairing liability, this may require the tenant to leave the building in better condition than at the beginning of the lease.
The function of a Schedule of Condition is to accurately record the condition of the demise at the start of the lease and is to limit liability. The Schedule of condition must be referred to in the lease to have any standing.
Without a Schedule of Condition, it is difficult for a tenant to argue that items in a final Schedule of Dilapidations are invalid due to the disrepair being present at the beginning of the term. This means the tenant may end up unfairly penalised paying for or repairing defects.
A Schedule of Condition may be more important when a lease is being assigned from an existing tenant. Any new tenant may inherit not only the disrepair present at the beginning of the original lease, but also any disrepair caused by the occupation of the existing tenant.
The Schedule of Condition is set out in a tabulated format to identify items of disrepair and with photographs as supporting evidence.
For a Schedule of Condition to be fully valid, it must be attached to the lease and be signed by both Landlord and Tenant. Without formal attachment in this way, the schedule may be disregarded during dilapidations negotiations.