News & Events
New code to clear leasing minefield
28 March 2007
A consortium of business, property, finance and legal organisations today publishes the updated Code for Leasing Business Premises. The easy to follow guide will help ensure that businesses avoid the possible pitfalls of lease agreements and that landlords operate to a pan-industry agreed standard.
The government endorsed code will be unveiled by communities minister Yvette Cooper today, with a number of radical changes from the 2002 edition. These include:
- Landlords should, on request price, alternative rent review terms on a risk-adjusted basis, rather than providing a menu
- Preconditions on break clauses are significantly restricted
- If subletting is allowed, it should be at the market rent
- At the time of negotiating the lease landlords must disclose known irregular events that would have a significant impact on the amount of future service charges
- Unless expressly stated in the heads of terms, tenants should only be obliged to give the premises back at the end of their lease in the same condition as they were in at its grant.
The new code offers three documents to improve leasing practice:
- A far more focussed and therefore succinct two-page landlords' code
- A step-by-step guide for tenants
- A heads of terms checklist, which all parties and their agents and solicitors can use during lease negotiations
It will be of particular help to small businesses, highlighting both the opportunities and problems of commercial leases. It will also ensure that landlords, particularly small landlords, follow the best practice agreed across the industry.
Commenting on the launch, Philip Freedman CBE, chairman of the Code Steering Group, said:
"Hundreds of hours have gone into the production of these three documents, but it will be all for nothing if we do not get them into the right hands at the right time. I strongly therefore urge prospective tenants, their agents, solicitors, bankers and accountants to ask for Code compliancy when negotiating a lease, and landlords and their representatives to volunteer it.
"The Code remains voluntary, but several organisations will be taking steps to embed it within their self-regulatory structures. This third edition represents a wake up call: tenants, particularly, SMEs, should ensure they are better informed about leases they are considering; and, landlords should ensure that they are providing terms which are transparent and fair."