In the current climate in which many occupiers may be looking to renegotiate the terms of their existing leases, the provisions of the new Lease Code may be helpful in highlighting key points to consider when approaching discussions with landlords.
The new Lease Code was published by the RICS in February 2020. It does not come into force until 1 September 2020 but will nevertheless provide a useful reference guide for tenants looking to renegotiate lease terms.
The Lease Code will apply to almost all lettings of business premises in England and Wales. A the key point to note is that parts of the Lease Code will be mandatory for RICS members in England and Wales, including registered agents and landlords.
The objective of the new Lease Code is to improve the quality and fairness of negotiations of lease terms and to promote the use of detailed heads of terms to ensure that terms are fair and balanced. This will also help make the legal process of agreeing leases more streamlined.
The mandatary requirements that must be complied with by RICS registered agents and landlords in lease negotiations are as follows:
Helpfully, the Lease Code includes a checklist so that you make sure that the mandatory requirements have been included in the landlord’s heads of terms.
Good practice guidance
The remaining provisions of the Lease Code set out good practice guidance for landlords and letting agents in negotiations of heads of terms, as well as matters to be considered by landlords and tenants and their legal advisers in negotiating the lease itself. The following may be of particular interest to occupiers, especially if renewing or extending an existing lease in exchange for rent concessions in the current market:
These requirements are not mandatory but if challenged a regulated landlord or letting agent may have to justify any departure from these to the RICS.
Parts of the Lease Code will become mandatory for landlords and agents to comply with from 1 September 2020; in the meantime the Lease Code sets out helpful guidance which may be useful when considering negotiation or renegotiation of lease terms in the current market. Please feel free to contact us at heads of terms stage to see if we can assist with negotiations and so that we are ready to deal with the documentation once terms are agreed.
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