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RICS – code for leasing business premises

The RICS has launched the first edition of its Code for Leasing Business Premises which comes into force on 1 September 2020. It will replace the voluntary Code for Leasing Business Premises in England and Wales (2007).
 
The aim of the 2020 Code is to improve the quality and fairness of negotiations on lease terms and to promote the issue of comprehensive heads of terms that should make the legal drafting process more efficient. It will apply to lettings of premises in England and Wales to Ts who carry on trade, professional or other business activities in them. The Code helpfully includes a template heads of terms and checklist as an aide memoir for negotiations before the grant of a new lease and on any lease renewal.
 
The Code will not apply to:
  • agricultural lettings;
  • premises that will only be used for housing plant and equipment (such as electricity transformers or telecoms) or advertising media (such as hoardings);
  • premises that are intended to be wholly sublet by the tenant; or
  • premises being let for a period of not more than six months.
The Code specifies the minimum heads of terms on a vacant possession letting (which must be in writing and marked ‘subject to contract’) as follows:
  • the identity and extent of the premises (and requiring the landlord to arrange the provision of a Land Registry-compliant plan if the lease is registerable);
  • any special rights to be granted, such as parking or telecom/data access;
  • the length of term and whether LTA 1954 will apply or be excluded;
  • any options for renewal or break rights;
  • any requirements for a guarantor and/or rent deposit;
  • the amount of rent, frequency of payment and whether exclusive of business rates;
  • whether the landlord intends to charge VAT on the rent;
  • any rent-free period or other incentive;
  • any rent reviews including frequency and basis of review;
  • liability to pay service charge and/or insurance premiums;
  • rights to assign, sublet, charge or share the premises;
  • repairing obligations;
  • the initial permitted use and whether any changes of use will be allowed;
  • rights to make alterations and any particular reinstatement obligations;
  • any initial alterations or fit-out (if known); and
  • any conditions of the letting, such as subject to surveys, board approvals or planning permission.
Not all of the Code is mandatory for RICS members – some is only good practice – but a RICS member who does not follow good practice may have to justify their action. Source: www.rics.org.
 

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