Our team of chartered surveyors at Harrison Clarke is being asked this question more often, and we are also sometimes asked, “If I only commissioned one survey, should it be a Leaseholder Survey or a Photographic Schedule of Condition?”
They are both good questions. Terminology in this field can be confusing, especially if this might be your first experience in taking on a business lease.
In this article, we explore the key features of each type of survey, to help you understand what the purpose of each is, how they differ, and why it isn’t really an ‘either/or’ scenario.
Taking on a lease in an old building can be a bit like taking on an old car that has been modified many times. You don’t know whether it has been well maintained. You don’t know if good quality parts have been used. And you don’t know who has been working on it.
You probably wouldn’t consider buying it until you had asked an experienced, trained mechanic to take a look, or if you weren’t confident that you had a large amount of spare cash to fix future defects.
When you lease a building, even though you don’t own it, you will normally take full responsibility for its maintenance and upkeep, and this will be stipulated in the lease.
If you don’t commission a survey, and later find out that you have leased a building with extensive and expensive issues to fix, repairs could cost you more than the rent that you pay your landlord.
The purpose of a Leaseholder Survey is to help you to fully understand the condition of the building, how this relates to the lease agreement you are about to sign, and what this might mean for your business financially.
You will already know how much the rent and business rates will be, and you will no doubt have an idea of your utilities, service charge and insurance costs.
However, you wouldn’t be able to estimate the costs you will incur to fix the building during the term of the lease and at lease end, without the knowledge your Leaseholder Survey will give you.
If this is your first lease, you might think that leasing a commercial building will be similar to renting a residential flat. In reality, there are vast differences which you might not be aware of until it’s too late, and that you might not even be aware of until after the lease has ended.
Crucially, if you have not fully adhered to your lease requirements, your landlord could make a claim for financial damages against you, in the form of a dilapidations claim.
It is common for these types of claims to be for sums well into five figures, and it is not unknown for multi-million-pound claims to be made on larger premises.
The Leaseholder Survey will help you to understand in detail how lease liabilities, including costs of repairs and dilapidations, can be accrued but, more importantly, the Leaseholder Survey will detail how elements outlined in a dilapidations claim can be mitigated or even avoided completely.
In practically all cases, for this very reason a Leaseholder Survey will pay for itself many, many times over.
One of the many possible strategies to protect a commercial tenant against a dilapidations claim is to limit the repairing covenant by ensuring that the property does not need to be passed back in better condition at lease end than it is at lease commencement.
This can be achieved by documenting in detail the condition of commercial property immediately before the lease is signed. At lease end, the Photographic Schedule of Condition will be consulted by the landlord or their surveyor when preparing a dilapidations claim.
If properly referenced in the lease, the Photographic Schedule of Condition will significantly limit the amount of repairs and, in some cases, the extent of redecoration which the tenant will be required to complete at lease end. This is likely to save the tenant a significant amount of money at lease end.
The Photographic Schedule of Condition is the most common mitigation strategy employed to reduce exposure to lease liabilities.
If you have been advised by your solicitor to commission a Photographic Schedule of Condition, and this has been agreed with the landlord, you should ask your surveyor to prepare a Photographic Schedule of Condition.
If you would like a greater understanding of your lease liabilities, and need an experienced dilapidations surveyor to help you consider how to reduce your liabilities across the span of a lease, you should also commission a Leaseholder Survey.
The process of commissioning a Leaseholder Survey first might lead to your surveyor advising you to also commission a Photographic Schedule of Condition. This suggestion will not be a case of the surveyor trying to drum up more fees, but to help protect your interests by giving you evidence to use when mitigating the dilapidations claim at lease end.
Remember, it is very rare for the advice you get from a surveyor before you take out your lease to not provide a significant return on the cost of the survey, over the course of the lease.
So, as you can see, the Photographic Schedule of Condition and the Leaseholder Survey both have different and equally useful purposes.
When you are leasing a new building, commissioning a Leaseholder Survey and a Photographic Schedule of Condition could be the best decision you make, potentially saving you tens of thousands of pounds.
The Leaseholder Survey is a product that is only prepared by Harrison Clarke Chartered Surveyors and we will be happy to discuss your pre-lease requirements for this, and for a Photographic Schedule of Condition.
When the time comes, we will be happy to negotiate a dilapidations claim at lease end on your behalf, minimising your financial obligations.
For further guidance and useful tips and information on the range of surveying services we provide, you can read our blogs and watch our videos. These are available on our website and our YouTube channel.
Call our friendly, expert and highly qualified surveyors on 023 8155 0051, or email us at info@harrisonclarke.co.
We would welcome the opportunity to help with any queries or needs you may have.
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Tim set up Harrison Clarke Chartered Surveyors in July 2017 following a series of public and private sector surveying roles, having previously worked for the University of Cambridge, Rund Partnership, Goadsby, and CBRE.
Tim has degrees in building surveying, construction project management, and business administration.
