A commercial occupier needs to be aware of the potential liabilities of a property prior to taking a lease, much like if they were purchasing a freehold interest. There are three areas surrounding the occupation of a Commercial Building with the first stage being Pre-Acquisition Building Assessment and Schedule of Condition, second stage Building Conversion and Adaptation with the third and final stage being the Exit Strategy.
It is not unusual for a lack of due diligence at this expensive time to lead to major headaches during occupation or at lease end. When considering taking a lease, the first stage we would recommend is to appoint a Surveyor to undertake a Pre-Acquisition Building Assessment. It is important for the Client to understand from the outset, the responsibility they are taking on as well as the financial undertaking that purchasing or leasing a Commercial Building can have.
A Pre-Acquisition Building Assessment
A Pre-Acquisition Building Assessment is a survey followed by a report upon the condition of the building. The Assessment aims to advise on the immediate condition of the building and identifies the likely maintenance and component replacement expenditure during the proposed term of occupation. The anticipated Dilapidations responsibilities at lease end will enable the Client to negotiate a better deal at the outset and put into place a long term strategic plan to mitigate liability at lease end.
It is worthy of note that the Solicitor drafting the lease may not have the opportunity to visit the premises and therefore this report can be a great advantage in achieving the correct lease terms to maximise the tenant’s protection.
In short, you cannot do better than not having the liability in the first place!
A Schedule of Condition
A Schedule of Condition is a factual document that includes an itemised description of the elements of the building and is cross-referenced to photographic evidence prior to a tenant taking possession. It provides a benchmark for the condition of a building at lease commencement.
The parties to a lease agree to limit the tenants to ‘no better’ than as evidenced by the Schedule of Condition. If the Schedule of Condition is attached to the lease agreement, it will become an invaluable tool to a Client when negotiating Dilapidations at the end of the lease term. Unknowingly, many tenants do not request a Schedule of Condition prior to possession and often find themselves being hit with hefty Dilapidations claims for repairs to damage that was already present prior to occupation.
Jonathan Shaw, Managing Director of Anderton Gables says “Our team at AG are responsible for assessing the commercial property prior to occupation. We aim to protect our Client entering the property by limiting the extent of the work that can be claimed on expiry of the lease and provide commercially aware technical advice to them throughout the process of occupation and lease end”.
So, in order to ensure you don’t end up refurbishing your Landlords building – get some advice!