In March 2018, the Royal Institute of Charted Surveyors (RICS) published a consultation on a professional statement currently designated as the "Code for leasing business premises", which incorporated a new Lease Code. The intention of this newly proposed Code is for this to replace the Code for Leasing Business Premises in England and Wales 2007 (“the 2007 Code”), which still remains voluntary for Landlords to adopt, should they so wish, during a commercial lease transaction.
The key difference between the 2007 Code and the proposed Code is that the latter will, in its current form, contain mandatory requirements that would need to be complied with by any agents and/or landlords who are RICS members or registered firms. The remainder of the new proposed Code sets out best practice recommendations which should be complied with unless the Landlord/agent can show a justifiably good reason to depart from these.
In addition, a failure to comply with the professional statement proposed may lead to legal ramifications against such members, for example a surveyor who has failed to act in accordance with the new Code could be held to have acted negligently in their professional capacity.
As well as the above, other key points outlined by the professional statement are as follows:
- The proposed Code stipulates that the agreement to the terms of a Lease must be contained within written heads of terms.
- These written heads of terms must include specific information as to the Lease inclusive of but not limited to: (a) the extent of the Premises (b) the length of the term (c) the proposed rent and rent review provisions (d) whether a rent deposit and/or guarantee will be required (e) Landlord and Tenant’s respective repair responsibilities and (f) the Tenant’s rights in respect of assignment, sub-letting or charging the premises.
- The statement provides for a Heads of Terms template which would be for Landlords/Agents to ensure that any Heads of Terms drafted up comply with the proposed Code. To supplement this a checklist has also been provided to allow Landlords/Agents who may use their own standard form Heads of Terms documentation, the ability to check whether their documents currently meet the proposed Code requirements or if changes would need to be made.
- An updated occupiers’ guide has been drawn up with the view of providing Tenants’ with guidance on the main factors to consider when agreeing to or negotiating the terms of a Lease.
The consultation process for this statement closed on the 12 of April 2018 and it will be worth keeping an eye on as to the conclusions RICS come to from this process. With the 2007 Code’s voluntary status leaving it, in practice, rarely used by Landlords and their Agents in it remains to be seen whether a Code with mandatory requirements contained within will appeal to members of RICS going forward.
For more information or advice please contact Nick Attwell on 01473 229242 or email firstname.lastname@example.org.