The Code for Leasing Business Premises in England and Wales 2007 was published in March and is intended as a voluntary good practice guide for use by both landlords and tenants. It is designed to avoid common pitfalls in entering into letting arrangements and to promote an informed and standard approach to key lease terms.
Sounds familiar? The code has been with us for some time now, having been published previously in 1995 and again in 2002. It originally came about as an attempt by the property industry to regulate itself in the face of central government pressure to regulate commercial lettings and address a perceived inflexibility in commercial lease terms. Uptake has been slow. Since its original publication the code has not had a huge impact on market practice. Reading University research suggests that the 2002 Code did gain a greater profile than the original code, largely due to its wider dissemination, but even then, it has had little impact in practice on individual lease negotiations. The 2007 Code represents a further attempt to deflect the government attentions from the industry.
So what makes the 2007 Code different?
The Code is the product of collaboration between commercial property professionals and industry bodies, including the British Property Federation, British Retail Consortium, and the Royal Institute of Chartered Surveyors. It comprises three separate documents (which are more user-friendly than earlier versions):
- a landlord code – two pages of recommendations for landlords;
- a tenant guide – simple guide explaining how commercial leases work; and
- a heads of terms checklist – designed for use by all parties and their agents and solicitors during lease negotiations.
Each element can be downloaded from www.leasingbusinesspremises.co.uk.
Will it be third time lucky?
Clearly the failings of the first two codes remain a concern. On the launch of the code, 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 British Property Federation are also doing all they can to promote the code. and accountants to ask for code compliancy when negotiating a lease, and landlords and their representatives to volunteer it.”
Our view
We believe that the code can be a particularly useful tool when negotiating a lease, especially from the tenant’s perspective. However, we can only start to assume that the code will be a real success when we start to see heads of terms coming through from agents which have clearly been negotiated by reference to the code. So far there is scant evidence of that and it seems that many landlords and agents are unaware of the code, or more likely they are simply choosing to ignore it.
What is more, some of the recommendations made in the Landlord’s Code are probably unrealistic. In particular the recommendation that landlords might offer both upwards and downwards rent reviews.
So far the code remains voluntary – so whilst nobody can be forced to adhere to it, the code’s supporters clearly hope that its use will quickly become common practice. Only time will tell – if history repeats itself, legislation might well have a part to play in the future.
