Schedule of Condition, the baseline
Prepared before the lease is executed. A factual evidential record of the demise's condition at lease grant. Appended to the executed lease and referenced in the repairing covenant. Its purpose is to fix the contractual baseline against which repairing obligations are later measured.
Schedule of Dilapidations, the claim
Prepared at or shortly before lease end (interim dilapidations are also possible during the term). A schedule of breaches of the lease's repairing, decorating and reinstatement covenants, supported by a costed remedial works section. Served by the landlord on the tenant; the basis on which damages are negotiated.
How the two documents relate
The Schedule of Condition fixes the lower limit. The Schedule of Dilapidations identifies the alleged shortfall against the lease covenants. Where a Schedule of Condition is in place, the dilapidations claim is reduced by the items that were already evident at lease grant.
What happens at dilapidations without a Schedule of Condition
Without a Schedule of Condition, the tenant's repairing obligation is unqualified, measured against the standard of a property of similar age and character. The dilapidations surveyor on each side then has to construct a retrospective view of what the demise looked like at lease grant. That retrospective view is contestable, evidence-light, and almost always to the disadvantage of one party.
Section 18 of the Landlord and Tenant Act 1927, a brief note
Damages for a breach of the repairing covenant at lease end are statutorily capped by reference to the diminution in the value of the reversion (Section 18(1), Landlord and Tenant Act 1927). The Schedule of Condition is not the only document relevant here, but it is the one that most directly evidences the condition the landlord let, and therefore the value the landlord could fairly expect on yield-up.