The government has again threatened to legislate to ban upwards-only rent reviews on commercial leases unless landlords adopt more flexible leasing terms.
Housing & Planning Minister Yvette Cooper has released a new code of practice on commercial leases which is another attempt to inject much needed flexibility into the landlord/tenant relationship.
Although seasoned observers might be tempted to point out that the industry has been here before the code is backed by big name landlords, such as British Property Federation, RICS and British Retail Consortium, that may lend it some credibility.
The code covers a wider range of issues than previous attempts i.e. not just the hugely contentious upwards-only rent review system but also break clauses, sub-letting, financial guarantees on assignment and the limitations of the fully repairing and insuring (FRI) clause.
BUSINESS FORUM COMMENT
This is the third attempt to get the industry to adapt to the rapidly changing needs of tenants in a highly competitive environment and some may be tempted to dismiss it as yet another attempt at delay on the part of landlords but there are some signs that this one may work.
Nationally the demand for retail space is outstripping supply (although not in Brighton) and there is more incentive for large landlords to play ball. Also the government is running out of patience with voluntary codes and there surely cannot be scope for a fourth one at some point in the future.
It is a great pity that RICS has not made compliance with the code compulsory for all its members and also that tenants have to request that it is applied to lease negotiations rather than it being applied as a matter of course.
If this attempt to introduce much needed flexibility into commercial leases fails, the Business Forum may well be adding its voice to those demanding legislation.
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