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Code-compliant leases of commercial property

The Code for Leasing Business Premises in England and Wales 2007

Code for Leasing Business Premises in England and Wales 2007

A Landlord who has a property or properties to let should consider whether to grant leases that comply with the Code for Leasing Business Premises in England and Wales 2007, also known as the Commercial Lease Code.

The Code was created following discussions between representatives of Landlords, Tenants and the Government. The Code aims to promote efficiency and fairness in Landlord and Tenant relationships. A copy of the Code can be found at http://www.leasingbusinesspremises.co.uk/.

What does the Code say and do I have to comply with it?

The Code contains guidance on how lease negotiations should be conducted, the provisions that should be included in a lease, and how Landlords should deal with Tenants during the term of the lease and when it comes to an end.

It is not compulsory for Landlords to follow the Code but many choose to do so. The Government has in the past suggested that, if the voluntary Code is not followed by the property industry, legislation might be passed to make compliance with the Code compulsory.

The Code is endorsed by many industry heavyweights including the British Property Federation, the Association of British Insurers, the Law Society and the Royal Institution of Chartered Surveyors.

What does a Code-compliant lease look like?

There are some “Code-compliant” lease templates in our Shops & Restaurants, Offices and Industrial lease folders. These templates are similar in format to our other leases but certain provisions have been drafted differently so as to comply with the Code. Particular points to note are:

• There are fewer restrictions on assignment in the Code-compliant leases (but the Landlord still has the right to refuse consent to an assignment if it is reasonable to do so).

• The Code prefers repairing obligations to be limited to handing the premises back in the same condition as they were at the start of the term, unless the heads of terms expressly say otherwise. If the repair covenant is to be limited in this way it is wise to annex a schedule of condition to the lease.

• Internal non-structural alterations do not require the Landlord’s prior consent, although they must be notified to the Landlord. (Some Landlords are uncomfortable with this loss of control over alterations.)

• Tenants receive a rent suspension whether the premises are damaged by an insured risk or an uninsured risk, meaning the Landlord bears the risk of uninsured damage.

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