Dilapidations documentation

Side letters

It is not uncommon for leases to be varied by side letters, frequently in relation to the sanctioning of alterations carried out by the tenant. It must be remembered that side letters are not deeds of variation and bind only the parties referred to in the letter. If a lease is subsequently assigned, the side letter may not always establish an obligation on the assignee as it was not party to the letter.

Deeds of variation

Leases can be altered by consent of the parties by way of a deed of variation. It is therefore essential to ensure that all such variations are identified and considered fully in order to establish the liabilities of the parties under the lease. Although the point is beyond the scope of this section, it is worth noting that, in some circumstances, a variation to a lease can have the effect of releasing a guarantor from its guarantee. The point should be borne in mind if one is advising a guarantor. Also worth noting although beyond the scope of this section is that, in the case of long leases of flats, there is a statutory basis for seeking a variation of a lease in relation to, among other things, the provisions concerning the repair of property (section 35 Landlord and Tenant Act 1987).

Schedules of condition

Schedules of condition can be appended to leases as a record of the condition and state of repair of the building fabric and services at the time the lease was entered into. Frequently leases specifically refer to schedules of condition and state that the intention of the schedule is to limit liability. In the absence of such an expression of intention, the repairing obligation is not diminished by the presence of a schedule of condition. Also, care should be taken when considering schedules of condition as the limitation can be specific to certain covenants and not others.

Where there is a schedule of condition that limits the extent of the repair covenant, then this will set the minimum standard of repair in which the tenant is obliged to leave a particular item. In reality, where an item has fallen in greater disrepair than is shown in the schedule of condition, it may well be that the only way to put the item into repair in accordance with the terms of the lease, as limited by the schedule of condition, is to correct the full disrepair.

In some instances (although this is a matter of fact and degree), the presence of the limitation can give rise to limits to the landlord’s claim, due to the effect of diminution in value. This is because when a valuer seeks to compare the difference between a building with some disrepair (as described in the schedule of condition) and a building with more disrepair, it is often not possible to distinguish between the two.

Schedules of condition are useful records of the arrangement of a building at the beginning of the term, and therefore of the extent of the landlord’s fixtures and fittings. Unless the lease specifically records otherwise, where a partition or other fitting is present in the schedule, the landlord will not be able to seek its subsequent removal.