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2020 RICS Code for Leasing Business Premises

Reasons to choose Wilson Browne

This new code comes into force in September and replaces/updates the 2007 Code which was often only referred to when negotiating the wording of break clauses in leases.

The 2020 Code may well have a far greater impact on lease terms.

There are some mandatory requirements but the real potential impact comes with the good practice requirements which potentially restrict or limit landlord’s rights in a number of substantial ways:

  • Authorised guarantee agreements should only be required where reasonably required. These guarantees operate to require an outgoing tenant to be liable for an incoming tenant’s liabilities and at present it is absolutely standard for all outgoing tenants to provide that guarantee.
  • Uninsured Risks – there should be a rent suspension and right to end the lease early for both parties. Uninsured risks are relatively new to the world of commercial leases and so it is useful to have a professional body, such as RICS, coming down with a view on what is reasonable.
  • Repair obligations imposed on tenants – these should be proportionate to the length of the lease and existing condition of the premises. At present there are usually only two standards of repair – one which imposes a high standard and the other which is limited by reference to a schedule setting out the current state of repair.  It will be interesting to see if the legal profession can come up with wording which reflects this good practice recommendation.
  • Alterations and reinstatement – tenants should be allowed to carry out internal non structural alterations without specific consent provided the alterations do not have an adverse impact and reinstatement should only be required if it is reasonable for the landlord to require it.

This Code has the potential to balance out landlord and tenant rights and obligations more fairly than is perhaps the accepted standard at present.  And probably now, in the fall out from the lockdown, is a time when tenants have greater power in negotiating lease documents.  It will be interesting to see where the industry settles in a year or so.

Nina Wilson

Posted:

Nina Wilson

Partner

Nina is a Solicitor and Partner of almost 20 years experience advising clients on commercial property law. A Legal 500 recognised Lawyer, Nina has acted in multi-million pound acquisitions and development agreements.