A decision recently released from the Outer House of the Court of Session provides some guidance as to the interpretation of repair clauses limited by a schedule of condition but for which such a schedule cannot be produced or has not been prepared.
The case concerned Dem-Master Demolition Limited (DDL), who acquired the landlord’s interest of industrial premises in Shotts at auction in 2012, which, at the time, were occupied in part by the defenders, Healthcare Environmental Services Limited (HEAL) under a lease dated late December 2009/early January 2010.
The Lease referred to HEAL accepting “…the Premises as being in such condition as shown on the attached Photographic Schedule…” and obliged HEAL (as tenant) to “repair, maintain and renew (and, if necessary for the purposes of maintenance and repair, to replace and rebuild) and decorate and keep the Premises and all permitted additions and new buildings, if any, in like condition as is evidenced on the said Photographic Schedule…”. No such photographic schedule was annexed to the Lease nor capable of being produced by either party.
The case came before the Outer House at preliminary proof to determine the proper interpretation of the repairing obligation and the circumstances surrounding the execution of the lease.
DDL sought to argue that, in the absence of the schedule of condition, the repair clause should be read without the reference to this and that, as such, the repairing standard was absolute and akin to those found in institutional full repairing and insuring (FRI) leases.
However, Lady Wolffe preferred the submissions of HEAL and found that, whilst there was no objective standard provided for (e.g. that of “good and tenantable condition or repair”), “there was an actual standard, which was the state of the Premises as at commencement of the Lease” and that the schedule of condition provided evidence of such state. As such, the absence of the schedule of condition posed an evidential rather than interpretive issue.
Evidence was led by both parties as to the condition of the Premises at commencement of Lease, which proved difficult for DDL, as they acquired the property after the Lease had been entered into and this will be interrogated further as the case moves to proof on liability.
The salutary lesson for landlords here is that the absence of a schedule of condition does not mean that the repairing standard is raised. What it does mean is that when it comes to the end of the lease, if the landlord is looking to enforce any breach of a repairing clause, evidencing the condition of the premises at commencement of the lease may prove challenging. It would be interesting to see if the tenant’s acceptance of the Premises as “good and tenantable” condition as evidenced by the schedule of condition would still necessitate evidence on a similar scale.
The case serves as a reminder that even if the schedule is not agreed it is better for both parties to document the condition as at the date when the lease is agreed, whether through a full schedule of condition or just a full set of photographs of the premises. If nothing else, it will give the party compiling that evidence the upper hand over a less prepared opponent in any dilapidations dispute to follow.
Full text of the judgement can be found here.
