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Government Launches New Code of Practice on Leases

LONDON-Planning and Housing Minister Sally Keeble will today unveil the new code of practice on commercial leases, which aims to inject new flexibility into the UK commercial property market.

By Graham Parker | Updated on April 22, 2002

LONDON-Sally Keeble, Parliamentary Under-Secretary of State at the DTLR will today launch the new code of practice on commercial leases. The document–drawn up after negotiations between landlords’ and tenants’ representatives–aims to introduce alternatives to the controversial upwards-only rent reviews that have been standard practice since the 1970s.

Under the UK’s long occupational leases rents are typically reviews every five years to open market value, in order to protect investors against the effect of inflation. However the property crash of the early 1990s highlighted an anomaly in the system: rents can usually only be reviewed in an upwards direction, which means that tenants were unable to benefit from falling property values during a recession.

Under the new code of practice landlords will have to offer tenants a wider choice of lease terms, if asked. These could include longer or shorter leases or leases with more or less security of tenure. And on rent reviews the code says “Rent reviews should generally be to open market rent. But is says landlords should be prepared to offer alternatives such as upwards or downwards rent reviews or rents linked to inflation.

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