Business tenants to gain ‘fair deal’ thanks to new industry guidance

The Royal Institution of Chartered Surveyors (RICS) – alongside major industry bodies – is developing new mandatory requirements to ensure businesses – of all sizes – gain fairer, flexible leases. Professionals and interested parties now have until 12 April to have their say on the consultation’s recommended requirements.

Lease negotiations and rent reviews can be a bone of contention between landlords and tenants of commercial property, and can lead to a dispute between both parties. However, RICS’s proposed professional statement with mandatory requirements around heads of terms – known as the Code for Leasing Business Premises – aims to ensure both are armed with the relevant information necessary to negotiate the fairest rent agreement and lease terms available to them.

For example, the Code for Leasing Business Premises explains the terms of a lease agreement for occupiers, and what to do if their landlord wants to increase their rent by what they feel is an unfair amount.

Paul Bagust, RICS Global Property Standards Director explains: “Property is likely to be the second highest business expense after wages, therefore signing a lease means that you are probably entering into one of the most significant financial commitments that your business will make.

“For small business in particular, the failure to negotiate and fully understand the terms of a lease can spell disaster. Professional advice is essential and this new Code sets out mandatory requirements that will ensure fairness and transparency for all parties in lease negotiations and rent reviews.”

The Code for Leasing Business Premises not only provides helpful tips for tenants, it also provides guidance for landlords on how to be ‘Code-compliant’ to ensure they too, benefit from a more transparent lease with greater flexibility in its terms. Measures include clearly stating in the lease agreement the proposed duration of the tenancy, rent review dates and upfront details of service charges a tenant is liable for.

RICS has collaborated with leading commercial property professionals and industry bodies – including British Property Federation, British Retail Consortium, Federation of Small Businesses and the Law Society – to produce balanced recommendations within the Code for Leasing Business Premises, that reflect the needs and opinions of both landlords and tenants.

Paul commented: “It was our intention with this new Code for Leasing to address concerns over inflexibility in commercial lease terms, and the support and collaboration of these leading industry bodies was imperative in creating strong, impartial guidance that supports and protects both the commercial landlord and the business occupier.

“We’d welcome any feedback from property professionals working in the commercial property sector as well as interested parties, as these mandatory requirements will not only serve to improve standards in the industry, but also raise more awareness of commercial property issues, especially among smaller businesses.”