Tenants to get better deal thanks to new code of practice

Commercial leases may become more tenant-friendly thanks to a new code of practice due to be published in November.

The voluntary code will tell landlords to scrap break clause conditions, offer alternatives to upward-only rent reviews on request and sublet at the market rent, according to a draft version of the guidelines obtained by our sister publication Property Week​.

The code will offer pub tenants hope of a better deal in future, but many will be cynical since the original code, published in 2002, has been widely ignored. It is seen as the last chance for commercial owners to avoid government legislation on leases.

In the introduction of the code, it is described as "a checklist for lease negotiations", aiming to be "clear, concise and authoritative".

On rent reviews, the code says: "The basis of rent review should be clear and exclude headline rent clauses. If it is market rent, landlords should on request offer alternatives to upwards-only rent reviews, priced on a risk-adjusted basis.

The code also calls for an end to the practice of imposing detailed conditions on tenants before they can exercise break clauses.

Barry Gillham, chairman of property agents Fleurets, said that most of the pubcos were already following the code and had upward and downward rent reviews.

"The government didn't put its teeth into the original code," he said. "But more leases are now negotiable and tenants are, on the whole, in a better position than they were five years ago."

Ian Fletcher, director of commercial policy at the British Property Federation, who has been on the steering group for the code, said there needed to be a specific document for the pub sector because of the additional issues surrounding the industry, such as the beer tie. But he added: "The code will be far more focussed than last and will hopefully give tenants a good deal."