Real Estate Law Blog: Levelling the playing field? New Code for Leasing Business Premises

The latest version of The Code for Leasing Business Premises comes into force today and applies to leases of most business premises in England and Wales. Unlike its predecessor, the new Code imposes a set of mandatory provisions, which RICS registered agents and landlords must comply with. It also introduces a set of good practice provisions to supplement the mandatory provisions. Failure to comply with the mandatory provisions, or justify departing from the specified good practice, may lead to disciplinary action by the RICS. The aim of the Code is to level the playing field between landlords and tenants, encourage parties to produce a detailed list of agreed terms at the outset and make the process of negotiating a commercial lease more efficient.

Mandatory Provisions

The Code states that lease terms 'must' be negotiated in a constructive and collaborative manner, and that a party not represented by an RICS member or other property professional must be advised about the Code and be encouraged to obtain professional advice. It also specified that heads of terms must be in writing, must state that they are 'subject to contract' and must cover 16 key terms. RICS have prepared a template set of heads of terms and a checklist of points, which should be considered when drawing up terms for a commercial lease. The requirement to set out heads of terms in writing will also apply to lease renewals, unless the renewal is expressed to follow the same form as the existing lease.

Good Practice Provisions

The Code provides accompanying good practice provisions which set out what the parties 'should' be considering when negotiating heads of terms. These guidance notes are, on the whole, legal-jargon-free and set out what RICS considers to be a fair position on each aspect of the heads of terms. For example, one of the points made in the guidance is that it is now accepted to be standard practice to see terms dealing with damage by uninsured risks in the insurance provisions.Whether the new Code makes any practical difference to the negotiation of commercial leases remains to be seen, given that most professionally drawn heads of terms should already reflect the areas of good practice in the Code. It may, however, prove to be a useful 'refresher exercise' for surveyors, landlords and lawyers on what is deemed to be commercially standard in the current market and a fair outcome when negotiating a commercial lease.

If you have any questions or need further information, please contact a member of the Real Estate Team.


The content of this page is a summary of the law in force at the date of publication and is not exhaustive, nor does it contain definitive advice. Specialist legal advice should be sought in relation to any queries that may arise.