New Lease Code
We await the conclusions of the consultation process launched by The Royal Institute of Chartered Surveyors (RICS) on replacing the current Code for Leasing Business Premises in England and Wales 2007 (Lease Code).
The Lease Code is the third in a series of voluntary industry codes, developed by a committee that included members of the property industry and professional advisors.
The codes provide a framework for creating a fairer balance between landlords and tenants and greater flexibility in commercial lease terms. However, uptake of the Lease Code in the property industry has been limited and it is not widely known about by small business tenants who could benefit from its provisions. This could change though as the consultation aims to elevate the Code by replacing it with a practice statement which will contain mandatory requirements that must be complied with by agents and landlords who are RICS members or registered firms.
If the new code comes into effect, written heads of terms will be required. While a model form of heads of terms is suggested, there is also a checklist of mandatory terms which include the following:
- the extent and details of the premises
- length of the term
- details of break rights
- whether rights of renewal are to be included or excluded
- details of rent and rent deposit
- rent review dates and mechanism
- tenant’s right to assign, sublet, charge or share premises
- details of service charge and insurance rent
- repairing obligations
- permitted use and alterations
- insurance obligations
- efficiency information
In addition to the mandatory requirements, the revised code contains best practice statements to be complied with and which are only to be departed from for “justifiable good reason”. What this statement will mean in practice is not clear.
The revised code also includes an updated occupier’s guide which explains some of the main factors that a tenant should consider when agreeing a lease.
It remains to be seen if take up of the new code will be fully embraced.
For further information on property development, commercial lease terms or commercial developments, speak with one of our commercial property solicitors.
This is not legal advice; it is intended to provide information of general interest about current legal issues.