Articles | Code for Leasing Business Premises 

The Lease Code is a voluntary code that aims to achieve fairness between landlords and tenants.  Marcus Francis examines the extent to which it has been embraced by the property industry.

 

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Marcus Francis

Marcus Francis

The Lease Code dates back to 1995 when the first Code of Practice for Commercial Leases was published as a voluntary agreement between professional and industry bodies.  The code was backed by the Government as an initiative by the property industry to regulate itself, address concerns over perceived inflexibility in commercial lease terms and avoid the need for legislation as proposed by the Government at the time.  It is generally accepted that the 1995 Code had little or no impact on market practice.  The second edition of the 1995 Code was published in 2002 and a study by Reading University concluded that although the 2002 publication had made a greater impact than the 1995 Code in that it had been more widely disseminated, even where it was known about, the 2002 Code was having little direct impact on individual lease negotiations.

The Lease Code 2007 was launched to achieve a fairer balance between landlords and tenants and greater flexibility in commercial lease terms.  The Code aims to promote fairness in commercial leases and recognises a need to increase awareness of property issues, especially among small businesses, ensuring that occupiers of business premises have the information necessary to negotiate the best deal available to them,

The Lease Code 2007 comprises a primary document and two supporting documents.  The primary document, called the “Landlord Code”, sets out fundamental principles in terms of how the following ten key areas of commercial leases should be dealt with by landlords:

  • Lease negotiations
  • Rent deposits and guarantees
  • Length of term, break clauses and renewal rights
  • Rent review
  • Assignment and subletting
  • Service charge
  • Repairs
  • Alterations and changes of use
  • Insurance
  • Ongoing management

The Landlord Code is supported by “The Occupier’s Guide” which helps tenants to understand better the intricacies of a commercial lease and by the “Model Heads of Terms” which are a precedent set of heads of terms that provide a checklist of issues to be determined and information needed before a lease can be agreed.

Awareness of the Lease Code 2007 is improving and its principles are creeping into commercial lease negotiations and drafting.  Some well known landlords including SEGRO and Industrious are committed to implementing the Code to the extent that they feel they reasonably can do so and various professional advisers are also promoting the Code to their clients.

 The website for the Lease Code 2007 is: www.leasingbusinesspremises.co.uk