Schedule of Condition - advice please

emmylou

The background: I run a small retail business. I have found new premises for my shop with a very large flat above for me and my family to occupy. We have found a buyer for our house and are about to exchange contracts. We are already living in the flat. The business is due to move mid-March, shop fitting due to start tomorrow.

However, the lease has not yet been agreed with the landlord. The premises are not in very good condition decoratively speaking and we are responsible for maintaining/repairing/renewing as necessary. We are happy to do the necessary work. However, both us and our solicitor see no reason why we should return the property (at the end of a five year lease) in any better condition than we received it in, and we have suggested a schedule of condition comprising of a series of photographs showing the original condition witnessed and signed by the letting agent and ourselves. We have already replaced the kitchen and bathroom. The landlord said he will only accept this amendment to the lease if we get a surveyors report (which for this property will cost £700+) which we cannot afford. The landlord has gone away for two weeks so we have to make the decision without any possible compromise from him.
The options are:
1. Take the risk we can resolve it and stay
2. Move back to our house and cancel the sale (and close a successful business down)
3. Rent elsewhere and go through with the sale (also means closing the business)

I would welcome any opinions or advise. I am not expecting or wanting anyone to tell us what to do but there might just be something we are missing, being too close to it. It is really getting me down and all options look unappealing.
Has anyone else done a schedule of condition themselves?

Emmylou

silvercar

The premises are not in very good condition decoratively speaking and we are responsible for maintaining/repairing/renewing as necessary. We are happy to do the necessary work. However, both us and our solicitor see no reason why we should return the property (at the end of a five year lease) in any better condition than we received it in,

Commercial leases often have the tenant responsible for the upkeep of the building.

You need to decide if the rental reflects this or not. It is a commercial decision balancing the costs of the rent+ repairs against the profit of your business.

The decision on whether you go ahead or not must allow for the costs to your business if you are not trading for a time.

Debt_Free_Chick

I agree - a commercial lease is usually a full maintenance and repairing commitment.

The rent should take account of the work needed to bring it up to a decent state. You should negotiate on this and I would have thought this would have been an easier negotiation than the legal schedule. What would the legal schedule do for you? It simply sounds like confirmation of the current state of the property .... but what does that get for you?

I'm also a little concerned that you've already moved in AND refitted the bathroom and kitchen ... which really only weakens your negotiating position.

(1) sounds like the least worst option, but I would be looking to negotiate the rent to take account of agreed works.

emmylou

I agree that we should repair and maintain it, but since it was in a fairly run down state to start with we do not want to be in the position of being legally liable to return the property in a 'show house' condition, ie repairing and maintaining to a much higher standard than existed at the time we moved in. If it was a brand new property I would have no problem with repair/maintenance but it is a 17th century building and the last tenants did not do any work at all, they just moved in and used it as it was and left it as it was. They apparently dealt 'on a handshake' without solicitors so maybe the landlord got his fingers burnt there. This concerns me as he may then get us to do everything they should have done!
The reason we have moved in already is a bit complicated but we did get 2 months rent free which covers the cost of the kitchen and bathroom so I am not too worried about that if we do leave.
We did not have to pay a deposit btw and we have to pay quarterly so as long as we move out before the next payment we won't be owed anything.

Debt_Free_Chick

OK, I understand now ... sorry

I can see the problem - how do you describe what would be a reasonable condition in which to return the property?

I would have thought you were under no obligation to return the property in a condition which is better than that when you took out the lease. Rather like an AST, but that you need to make good your own wear and tear.

Is this is what your solicitor is suggesting?

I can see both sides here - you don't want to be liable for improving the property. And the LL wants you to do what you are supposed to do. I'm sure there's room for agreement and compromise here.

My starting point would be ...... We shall maintain the property in line with its current state. In practice, you are going to improve it, but you don't want to be legally obliged to do so.

Is that where you want to be at?

Given that you can get out when the next rent is due, I'd wait for the LL to return and discuss directly with him. Solicitors will confuse the issue with lots of legal jargon at this early stage. Better to have a firm agreement with the LL and then tell your solicitor what you've agreed.

HTH

emmylou

Thanks DFC, for taking the time to reply :-)
Yes, our solicitor says photos should be enough, and we have asked the agent to witness them as a precaution. But the landlord will only accept us amending the lease to say we only maintain up to the current standard if we get a surveyor's survey, which is like a snapshot of the state of the property at that time.
We can not afford to do this and see no need to do so. The agent also agrees there should be no need for this. It seems to just be the landlord who does!
I think we may be walking away from this one somehow :-(

Debt_Free_Chick

It's difficult to know what to suggest as it seems as though neither you nor I can understand what the LL is afraid of.

Structural maintenance is your responsibility too .... is it not? Perhaps he's concerned that if there's a problem, you will only "partly repair it" rather than fully repair it. I can see his point .... and yours.

Friendly chat over a cup of tea I think. As with all negotiations, each party needs to understand the other side's position ...... in order to reach a mutually agreeable compromise

HTH

emmylou

We are not responsible for the structure or exterior actually, thankfully given the age of the building!
I don't think he is the 'cup of tea and a chat' sort but you never know. Unfortunately since he is away for a very crucial 2 weeks we may have to make the decision without knowing his viewpoint!

Thanks again!