In Dem-Master Demolition Ltd v Healthcare environmental services Ltd  CSOH 14 the Outer House of the Court of Session considered the interpretation of the repairing clause in a commercial lease which referred to a photographic schedule of condition but the schedule of condition had never been prepared.
Dem-Master Demolition Ltd held the landlord’s interest in the lease of an industrial property in Shotts which commenced in 2010, having acquired the property at auction in 2012. They sought declarator that the lease had been terminated by irritancy notices that they served following the failure of Healthcare Environmental Services Ltd to comply with notices requiring them to carry out certain repairs. The case came before the court as a preliminary proof, to consider the circumstances of the execution of the lease and the construction of the repairing obligation.
What the Court decided
The court preferred the submissions of the defender. Lady Wolffe determined that, as the defender alleged, the property had been in a dilapidated condition at the date of entry, and it was therefore unlikely that the tenant would have accepted an onerous repairing obligation. The ordinary and natural meaning of cl.6 is that the defender was obliged to maintain the property in the actual state that it was in at the outset of the lease, as evidenced by the photographic schedule of condition. The words “in like condition” protected the tenant from any requirement to restore the property to a higher objective standard, providing certainty as to the actual repair standard to be achieved. The absence of the schedule of condition did not change the meaning of cl.6.
What you should do
Many leases impose an obligation on the tenant to maintain the property in “good and substantial repair and condition”, but subject to the qualification that the tenant is not obliged to repair any defects that are specifically noted in the schedule of condition. If there are specific areas of the property that are in a very poor state, the tenant should consider carving out any liability to repair those in the repairing clause, to remove any scope for doubt.
Even if the parties cannot agree the terms of a schedule of condition, it will benefit both the landlord and the tenant to keep their own photographic record of the condition of the property at the date of entry, should such evidence be required for a dilapidations dispute.
It is vital to engage the services of a surveyor, who can not only advise on the terms of the repairing obligation, but also recommend any works that ought to be carried out as a preventative measure to prevent further deterioration in condition.