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New RICS Code for leasing business premises

Reasons to choose Wilson Browne

The new RICS code for leasing business premises was published on 12 February 2020 and takes effect from 1 September 2020.  Whilst the existing 2007 Code is not mandatory, the new Code contains mandatory provisions which must be complied with by RICS members and firms regulated by RICS.

To which tenancies will the new code apply?

  • All lettings to tenants carrying out trade or business activities for a period exceeding 6 months.
  • Excludes agricultural lettings, plant (e.g. telecoms and electricity transformer leases) and advertisement hoardings.

What are the mandatory provisions?

  • Negotiations must be approached in a constructive and collaborative manner, to produce letting terms that achieve a fair balance between the parties.
  • A non-represented party must be advised about the existence of this code and advised to obtain professional advice.
  • Heads of terms must be provided before the initial draft lease is circulated (the landlord or its letting agent is responsible for compliance) and there is a list of requirements to be included in heads of terms.

What information must be included in the heads of terms?

  • Extent of the premises –if the lease is registrable (with a term over 7 years) then the Landlord is required to produce a Land Registry compliant plan.
  • Term – length, any options to renew or break, whether the 1954 Act will be excluded
  • Rent – amount, frequency of payment, business rates, VAT inclusive, rent free period, any rent reviews and the basis of review, liability for service charge and insurance rent
  • Rights – any parking and telecoms rights
  • Repairing Obligations – who is responsible for repairing what parts of the premises
  • Alterations – including any initial fit out and reinstatement provisions
  • Alienation – including rights to assign, sublet, charge and share the premises
  • Permitted Use –and whether any change of use is permitted
  • Conditions – whether any rent deposit and/or guarantee will be required and whether this is subject to surveys, board approvals or planning permission.

RICS have helpfully provided a template heads of terms at Appendix A of the new code found here

Ika Částka

Posted:

Ika Částka

Partner

Ika is Head of the Commercial Property team and has been advising individuals and businesses across Northamptonshire since 1986, specialising in commercial, agricultural and rural property matters for both businesses and individuals.