James Letchford discusses the code for leasing business premises

Learning “how to code” for those involved in commercial property

Some say that the most important skill in the future will be to know how to code. Unfortunately, whilst a self-professed tech geek, I really only know about property law so when I hear about “code”, I assume people are referring to the Lease Code.

I’ve been around long enough to remember when Lease Code (or more precisely, The Code for Leasing Business Premises in England and Wales 2007) was first published. It was with some excitement when I found that it was being replaced by a new code that was published in February 2020 and effective in September 2020.

The 2020 Code is the result of representatives of landlords, tenants and trade bodies interested in leases. Its purpose is to improve the quality and fairness of lease negotiations. The 2020 Code is a RICS (Royal Institution of Chartered Surveyors) professional statement and sets out the requirements of practice for RICS members and firms regulated by RICS.

The effect of this is that parts of the 2020 Code, unlike the 2007 Code, are mandatory and contain statements that RICS surveyors and firms must comply with and elements which set out best practice for which justification might be needed for not following the Code.

A few keys points for matters which have to be complied with:

• any unrepresented party should be referred to the 2020 Code and recommended to obtain professional advice
• heads of terms should record the agreement of terms between landlord and tenant
• negotiations should aim to produce letting terms that achieve a fair balance between the parties

In terms of “best practice” points relating to lease negotiation, a few of the key points for me are that:

• a tenant’s break option should only be conditional on the tenant paying all basic rent, giving up occupation and leaving no subtenants or occupiers. Discussions about disrepair should not impact on the break
• a rent review should not seek to result in a “headline rent”
• authorised guarantee agreements (AGAs) should not be mandatory on an assignment of a lease but where the landlord reasonably requires the outgoing tenant to give one
• leases should consider including provisions relating to uninsured risks
• consideration should be given to including “green” provisions like those in the Better Building Partnership’s Green Lease Toolkit

Landlords, tenants and their agents should consider this Code before any letting.

For specific advice on the lease code, or if you have questions about any other commercial property issues, please contact James Letchford on 020 7412 0050 or james.letchford@hunterslaw.com.