Pothecary Witham Weld Solicitors
Thursday 9th September 2010
Legal Updates The Commercial Lease Code 2007
| The Commercial Lease Code 2007 |
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What is it and how does it work? There have been significant changes in commercial leases over the past two decades - the most notable perhaps being in the length of a lease. The British Property Federation (BPF) suggests that the traditional 20 or 25 year term lease, so predominant only 20 years ago, has given way to much shorter leases with an average term of just 6.4 years. Coupled with other changes in the market (i.e a greater use of break clauses and flexible lease arrangements), the industry as a whole is now offering a choice of different lease terms. Within this changing landscape, The Commercial Lease Code 2007 (now in its third edition) is an attempt to promote good practice. It has been compiled with the support and input from a range of organisations to include commercial property professionals and industry bodies, representing both landlords and tenants. Its aim is to set out the full range of ‘flexible elements’ landlords should offer and tenants should expect, in negotiating a commercial lease – ultimately seeking to promote fairness in commercial leases. The Code currently consists of three parts summarised as below: 1. Landlord Code : 10 point guide for landlords for making their lease code compliant and dealing with the need for clarity and flexibility on : 1. Lease Negotiations Although supported by an accreditation scheme, the Landlord Code remains voluntary. Where there is a departure from the Code, ‘members’ (i.e parties who have signed up to the Code) should state that there is a departure from the Code and explain the reasons why. What this means is that not all landlords will offer code-compliant leases – even though the Government is showing a keen interest in ensuring compliance. 2. Occupier’s Guide : explaining terms, advising on need for clarity and understanding each and every term of the lease. This is intended to provide useful information and tips for tenants, raising awareness of property related issues pointing out that unless the terms are negotiated in the tenant’s best interests before the lease is entered into, subsequent changes may not be possible without cost and complications. The Occupiers Guide is not a substitute for professional advice and tenants should always consider seeking independent professional advice before accepting the terms of a lease offered by the Landlords. 3. Model Heads of Terms : providing guidance on drafting of basic terms to be found in commercial leases. Are there any conclusions to be drawn? Though it is no doubt well intended, the Code remains a voluntary point of reference for both landlords and tenants. Despite the accreditation system and the show of support for the Code by many professional bodies and institutional landlords, there is of course nothing stopping them from departing from the Code in parts, or in its entirety. It is likely therefore that market forces will continue to dictate the terms offered by a landlord and the terms accepted by a tenant – with the party in the stronger negotiating position being more able to impose their preferred terms. The success or otherwise of the Code may well depend on a changing market where tenants become more astute and demanding as to their requirements and landlords find that a Code Compliant Lease is seen as a more attractive opportunity by tenants. Ultimately, as with all voluntary codes, its impact is likely to be limited as parties will only refer to the Code if they deem it to be in their own interest! This article is a summary only of The Code for Leasing Business Premises in England and Wales 2007 and is not a substitute for proper legal or other professional advice. If you wish to find out more about the Code, its ‘model clauses’ and how they may effect or benefit you, please contact either : Ajmal Hussain (BS): Tel: 01279 506421 or via e-mail or John O’Connor (London) : Tel: 020 7821 8211 or via e-mail
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