If you are a commercial landlord or commercial tenant, you will enter into a lease on the property you lease out or occupy.
The vast majority of commercial leases contain tenant covenants to repair, decorate, comply with statute, and to yield up the demised premises at the end of the term. Many also include covenants to reinstate alterations at the end of the term (or obtain landlords consent to carry out alterations). Generally this is what is known as a Fully Repairing and Insuring Lease (FRI), so for a tenant it is vital that you fully understand your potential liabilities before signing the lease.
If you wish to leave the premises before the end of the lease, you will need to surrender your lease via your solicitor. Whatever the reason for the surrender and whatever the outcome, there is little doubt that if you have a fully repairing and insuring lease, that you will have considerable additional expenses.
Landlords make money at the end of every repairing lease and though we act for many landlords, we also act on behalf of tenants. When you surrender a lease, you are not in the strongest of negotiating positions and your landlord's surveyor and legal team will know this.
Failure to comply with the terms of the lease can lead to a claim for Dilapidations, for the costs of returning the property in a reasonable state of repair. Even though the lease may say "keep" in good repair, in practice that means "putting" it into good repair. Settlement of dilapidations can either be the tenant paying the cost of those works to the landlord, or the tenant undertaking the works before the end of the lease.
A Schedule of Condition is a record of the condition when the tenant takes occupation, and is appended to the lease and used to mitigate the level of dilapidations. At the end of the tenancy (and sometimes in the middle of the tenancy), a Schedule of Dilapidations is drawn up by the landlords surveyor, and served on the tenant.
Many commercial tenants do not bother with a Schedule of Condition because they think it is too expensive. That is false economy, as a good surveyor can potentially save you thousands of pounds. As long as you maintain the property in accordance with the terms of your lease, a schedule of condition will pay enormous dividends when you come to vacate the premises.