Service: Agency | Sector: London Offices | Contact: Graham Foster
The lease code was first published 23 years ago – but was it a waste of time? It was backed by the Government as a property industry led initiative to regulate itself, and was published in 1995, with further editions in 2002 and 2007. I recall being at the launch by Yvette Cooper in March 2007; she was late to the launch. Has the industry been any more diligent in adopting it? Amongst other objectives, it was expected to reflect the increasing lease flexibility required by tenants. Following consultation by the RICS, which closed in April 2018, further updates are awaited.
Why is it taking so long for the third revision to be published? And does it even matter in today’s market, with the significant growth in the serviced office sector in the last five years? The revised code is intended to contain a number of mandatory requirements, and the updated version will also contain best practice statements only to be departed from for ‘justifiable good reason’!
But how many landlords will agree to depart from upward-only rent reviews and agree upwards or downwards to market rent? How many landlords will agree to grant leases inside the 1954 Act? How many tenants care? Just two of the provisions in the code that all experienced property professionals know are driven by supply and demand.
The market is now and always has been driven by the simple economics of supply and demand, which is what dictates lease terms. The code may be a great idea but tenants will only be able to achieve direct compliance with the code in a tenant favourable market. Could we be on the cusp of that?