RICS Lease Code 2020 for Leasing Business Premises
The Royal Instruction of Chartered Surveyors (RICS) has launched The Code for Leasing Business Premises in England and Wales (the Lease Code 2020). The Lease Code 2020 replaces the Lease Code 2007.
The Lease Code 2020 applies to tenants who will carry on trade, professional or other business activities in premises let in England or Wales. It does not apply to agricultural premises, premises which are only used to house plant and equipment or for advertising, premises to be wholly sublet by the tenant and short term lets for 6 months or less.
The Lease Code 2020 contains a RICS Professional Statement which comes into effect on 1 September 2020. When negotiating terms of a new lease, RICS members will be obliged to observe the mandatory requirements of the Code which relate to how the landlord should approach agreeing the lease terms with the tenant. The requirements will also apply to lease renewals or extensions except where the terms are to follow the existing lease. The requirements are as follows:-
- The lease terms must be negotiated in a constructive and collaborative manner;
- all parties not represented by a RICS member or other property professional must be informed about the Lease Code 2020 and encouraged to obtain professional advice;
- the heads of terms must cover all of the lease terms listed in the Lease Code 2020.
These requirements are intended to improve quality and fairness in negotiations on lease terms carried out between the parties' surveyors.
The Lease Code 2020 sets out a list of lease terms to be covered by the heads of terms and makes recommendations and gives guidance on each of the topics of the heads of terms. These recommendations are not mandatory, but normal good practice. The issue of comprehensive heads of terms should make the drafting process more efficient when solicitors are instructed to record what has been agreed between the parties.
The Lease Code 2007 was criticised as it lacked 'teeth'. Only time will tell if the Lease Code 2020 will successfully address these issues.
This article is for general guidance only. It provides useful information in a concise form. Action should not be taken without obtaining specific legal advice.