New Commercial Lease Code-Again…
Designed to put tenants on an equal footing with landlords when negotiating leases, the Code for Leasing Business Premises in England and Wales 2007 was launched this year.
As with the previous Codes, it does not have legal status. However, whilst the previous editions of the Code had little real effect on the industry, it is hoped that this latest voluntary code will have more impact and the Government has even implied that it will legislate if market practices do not change.
The Code aims to ensure that parties to a lease have easy access to information explaining the commitments they are making in clear English. The expectation is for preliminary negotiations to be more transparent and thereby promote efficiency and fairness in the relationship between landlord and tenant.
The code comprises three elements:
The Landlord Code
This details ten requirements for landlords which cover:
• Length of lease term
• Lease negotiations
• Rent review
• Assignment and Subletting
• Service charges
• Alterations and change of use
• Ongoing management
• Rent deposits
The aim is for the recommendations to be used as a checklist for negotiations both on the grant and renewal of leases. Clearly, this may not always be possible or practical and some requirements actually represent a departure from current leasing practice.
The Occupiers Code
This provides useful background information and 37 tips which follow the order of the topics in the Landlord Code and appear to be aimed at small businesses. For example, the tips include:
• Rent deposits – make sure you know when and how you can get your deposit back.
• Lease length, break clauses and renewals – take professional advice at least six months before the end of the lease and on receipt of any notice from the landlord under the Act.
• Repairs – get a formal photographic schedule of condition before taking the lease to record the condition.
• Alterations and change of use – make sure the lease allows non-structural alterations. You should remember that you should notify the landlord of any non-structural alterations you do make.
Model Head of Terms
This document sets out a detailed list of the main points which should be included in a business lease. It provides a workable checklist for lease negotiations although it will no doubt need to be supplemented in the case of more complex omissions.
The Code will be more accessible to small businesses and should ensure that small landlords follow best practice. In time, tenants may seek ‘code compliant’ leases and transactions should complete more quickly and with less disputes.
Whilst the Code is written in a user-friendly style, it provides a framework only and is not a substitute for professional legal advice. Leasing practice remains a complicated procedure and you should always consult our commercial property team to avoid future disputes and potentially expensive litigation.
For further advice on property and other business issues, contact our commercial team at Hand Morgan & Owen on Stafford 01785 211411 or Rugeley 01889 583871.
Published on web site – December 2007
The contents of this article are for the purposes of general awareness only. They do not purport to constitute legal or professional advice. The law may have changed since this article was published. Readers should not act on the basis of the information included and should take appropriate professional advice upon their own particular circumstances. (50587)