The new RICS Code for Leasing Business Premise (‘Code’) was published this month and will take effect from 1 September 2020 to replace the 2007 Lease Code. This is significant for RICS members as there are mandatory requirements which they must comply with. A departure from these requirements could result in legal or disciplinary proceedings. The Code applies to most commercial lettings in England and Wales.
The aim of the Code remains the same as the 2007 Lease Code - to encourage fairness in the negotiations between a landlord and tenant and to ensure that the heads of terms were comprehensive. However, the Code goes further in making some requirements mandatory. These include that negotiations regarding the lease must be approached in a constructive and collaborative manner and a party not represented by a RICS member or other professional must be advised about the existence of the Code and its supplemental guide, and must be recommended to obtain the advice of a professional. The requirements apply to lease renewals and extensions as well as new leases.
The Code contains a template heads of terms and a checklist. The template does not need to be used, but there must be written heads of terms which must contain certain points, including:
The Code also details lease negotiation ‘best practice’, which is not mandatory but RICS members may need to justify any divergence from them. Useful information for tenants is provided in a supplemental guide which gives details about the lease process and ongoing lease matters once the lease has been granted.
RICS members will need to consider the Code carefully to ensure compliance with the mandatory requirements and may need to review their standard heads of terms and leases. The full code can be viewed here.