These are surprisingly not understood and applied as much as they should do, with people not realising the potential of these.
Often known as Schedules of Condition with more commercial properties, or Inventories with residential ones, they’re basically a document logging the condition of the property before a tenant takes a new lease there.
Often full of pretty pictures, they describe just how good or bad the condition of the property is and what repairs already exist – the idea being that the tenant is not responsible for those that already exist, but only those that appear afterwards as the property’s condition deteriorates.
It does make sense really, particularly when standard repair clauses in leases can make a tenant liable for all repairs that exist at day one of their lease. So even if they inherit a dodgy roof from a previous tenant, then tough-luck with a full repairing liability with no Schedule of Condition to limit this.
Therefore, there are some serious advantages in arranging these. The final liabilities and repairs right at the end of the lease can be clearly identified and can help the whole discussion between a landlord and tenant at the end of the tenant’s occupation.
And even if there are disputes and you have to involved third parties and even the court, then such documents will certainly help narrow-down what the issues are.
Seven Ways to Get Schedules of Condition Right
As you get into the nitty-gritty of what these documents are and how to effectively use them when managing properties, then here are seven core issues to be aware of.
1. Knowing What to Include
In short, the Schedule needs to log all the faults and disrepairs of the property by both a photo and short description.
In practice, you will need to ensure the detail is clearly clarified in order to end any hick-ups in the future, for example:
• The names and signatures of all parties agreeing to this
• A clear date of the Schedule and actual photos and log if very different
• A logical order of issues, clearly page-numbered
• Each fault and disrepair clearly described with where it is, what the problem is, and how bad it potentially is. You may need to say how many of these are affected, and even help give perspective by leaving an object like a chair or coin in the picture to help.
• Clear photos both close-up and bigger-picture to help locate in the context of the wider property
2. Covering all Areas Properly
A schoolboy error here is to look at say a nicely fitted-out property and assume that everything is included. However, when you look at say the demise of the lease and what areas the tenant is actually responsible for, then suddenly there can be hidden areas like a roof or outside yard area that also need looking at and including.
Even if this does then cause questions, you can always re-negotiate liabilities in different phases. So a patched-up roof may mean a landlord maintains liability for that, whereas the tenant is liable for everything else. Or the Schedule of Condition may limit the liability of the roof, but not on the inside parts of the property.
3. Correctly Referring to Elsewhere
Once you have the agreed Schedule of Condition, then make sure it is correctly referred to and used in all other documentation for the property.
So, a classic mistake is where the Schedule is mentioned and included with a lease, but not actually then referred to in all the right clauses of the lease like the repairing and redecoration obligations, and the re-instatement and yielding-up of tenant alterations.
Plus, see if there are other documents like a License of Alterations for any refit, or Dilapidations claim from a former tenant that needs involvement.
4. Having a Joint Effort
It’s also worth seeing if the whole process of agreeing the Schedule can be done as a joint effort between a landlord and tenant to save everyone’s time and money in the process.
Typically one party will produce this, maybe the eager tenant driving this, or the proactive landlord carefully documenting the property’s condition.
However, the other side may disagree with certain points, or want further clarity and detail in the document.
Therefore, to cut the chase, arrange for them both to be involved. Even with one doing the actual drafting, they can both be there at the inspection and agree specific issues.
5. Getting the Timing Right
This sounds obvious, but make sure the timing of this is spot-on.
The sweat spot is just before any lease or agreement actually completes so this record is near this point as possible, and yet not so late that it delays matters and causes panic.
But what you don’t want is this being completed say six months before the lease completes, maybe because negotiations are dragged out, and which therefore does not document any changes in this time from maybe a former tenant not correctly clearing the area, or further property damage from a leaking roof.
6. Circulating the Right Copies
When you have the final copy, and then make sure everyone is in agreement to this before the final version is completed.
Ideally this needs to be fixed to the main lease and documentation, both literally with any hard copies for signature, but also digitally.
It’s also important to keep the correct digital and file copies stored way, whether stored on CDs or USB sticks or people’s servers. Also, access to any original large-sized photos can help clarify any points of contention in the future.
7. Getting Outside Help
As you begin to see what’s involved with such Schedules of Condition, then you’ll see the merit in involving experts to not only problem-solve when they’re already there needing interpretation, but first correctly creating them as well.
This is maybe a Building Surveyor or Agent, and although there is a cost at the beginning to agree payment of by one or all parties, it can be worth it’s weight in gold when dealing with dilapidations and repairs at the end of things.
Ideally, they will also help with the whole process, or at least the key parts of it. So even if not the actual preparation of the schedule itself but checking how this relates to the lease and other documentation and the property in question.
They will have that expertise to carefully place this document in the context of the wider property interest, and any vacant possession, dilapidation, re-instatements and alterations issues later on.
Sussing out the Secrets to Schedules of Condition
So, no matter what interest you have in a lettable property, such Schedules of Condition and Inventories can play a huge role in carefully managing end repairing liabilities – whether the tenant having to do them, the landlord first requesting them, or an advisor trying to clarify them.
Which is why they must be taken seriously, and right at the beginning of any new lease and letting. Although they are slowly getting more popular as people wise-up to just what repairs can be required at a property, they should still be an obvious question to ask when negotiating any new lease.
Need More Help?
Claim your FREE Property Management Pack here – including a 15-point Property Deal Cheat Sheet, and Introduction & Chapter from our amazon-best-seller book, the Property Management Guide.