When taking a commercial lease, tenants understandably focus on the rent, location, lease length and whether the premises are suitable for their business.
The physical condition of the property can sometimes become secondary.
That can prove to be an expensive mistake.
Commercial leases can place significant repairing obligations upon tenants. Depending upon the wording of the lease, a tenant could potentially become responsible for dealing with defects that were already present when they moved into the property.
For that reason, a Commercial Building Survey before committing to a lease can be an important part of the tenant’s due diligence.
Understand What You Are Taking On
A commercial property may look perfectly acceptable during a viewing.
However, a Building Surveyor will approach the inspection differently.
We will consider elements such as the roof, external walls, windows, internal finishes and evidence of dampness, cracking or historic maintenance issues.
The objective is not simply to create a list of defects.
It is to help the tenant understand the condition of the property they may shortly become responsible for.
Repairing Obligations Can Be Significant
The wording of the lease is crucial.
Some commercial leases can place extensive repairing responsibilities upon the tenant.
This is where surveying and legal advice need to work alongside one another.
Your solicitor advises you on what the lease requires you to do.
Your Building Surveyor advises you on the physical condition of the building and what those obligations could mean from a practical perspective.
Understanding both before signing the lease places the tenant in a far stronger position.
It can also help reduce the likelihood of an unexpected dilapidations claim at the end of the tenancy.
What About a Schedule of Condition?
A Schedule of Condition can be particularly valuable when taking a commercial lease.
The report provides a written and photographic record of the condition of the premises at or around the commencement of the tenancy.
However, simply having a Schedule of Condition prepared does not automatically limit the tenant’s repairing obligations.
The lease needs to be appropriately drafted so that the Schedule has the intended contractual effect.
Your solicitor should therefore confirm precisely how the Schedule of Condition is incorporated into the lease.
Building Survey or Schedule of Condition?
The two reports serve different purposes.
- A Commercial Building Survey is primarily there to advise you about the building.
- A Schedule of Condition is primarily there to record the building’s condition.
For some commercial tenants, both can therefore be appropriate.
The Building Survey can identify significant liabilities before the lease is completed, while the Schedule can create a photographic and written benchmark of condition at the commencement of the tenancy.
When Should the Survey Be Undertaken?
Ideally, before the lease is completed.
Survey findings can then be considered as part of the lease negotiations.
If significant roof repairs, water ingress or external maintenance requirements are identified, those matters can potentially be addressed before the tenant becomes contractually responsible.
Trying to address the same issue once a lease has been signed can be considerably more difficult.
Is a Survey Worth the Cost?
Commercial repairing liabilities can be substantial.
The cost of inspecting the premises before signing the lease can be relatively modest when compared with the potential cost of roof replacement, external repair or a terminal dilapidations claim.
The key is understanding the liability before taking it on.
Stokemont’s Approach
At Stokemont, we regularly act for commercial tenants before they enter into new leases.
We can undertake a Commercial Building Survey, prepare a Schedule of Condition where appropriate and work alongside the tenant’s solicitor to ensure that the condition of the property is properly considered.
If you are about to take a commercial lease, speak with the Stokemont team before becoming legally committed. We’ve also got a fixed cost quote feature on our website.
