What does new RICS code for leasing mean for developers?

The first thing to note is that this code has teeth. A RICS professional statement is binding for members and firms. If developers are not RICS members, the teeth do not bite them, but will bite their letting agents. This is unlikely to make much difference on large pre-lets where parties tend to be professionally advised, but where the tenant is unrepresented, developers will need to provide a copy of the code – no more ‘winning’ points by failing to mention the point at all. The teeth start to bite on 1 September 2020.

Secondly, the intention seems to be to front-load negotiations on to the heads-of-terms stage. By the time a code-compliant deal gets into solicitors’ hands, many key points should have been covered. Will developers have solicitors draft code-compliant leases, or leave the tenant’s lawyers to make any changes?

However, not all points envisaged by the code are settled at pre-let stage. You might know the tenant will need a wayleave or air conditioning, but not know the route of the cables or the location of the rooftop apparatus. Indeed, the incoming tenant might want some bespoke works done that need planning permission or the consent of a third party. Exceptions of this nature are permitted, but RICS members and firms should make sure they keep a note of why the exception was reasonable.

A good lawyer can always spot some points in the small print, and the code is no exception. Developers will be particularly interested in the suggestion that tenants’ alterations should stay in place at the end of the lease unless it is reasonable for the landlord to require their removal.

It is also relevant to notice what is not in the code. The sample heads of terms and checklists do not refer to landlord’s contributions to carpets and floor boxes, for example. We welcome the work from many industry bodies that has gone into this code, but traps for the unwary remain.

Suzanne Gill is partner and Malcolm Rogerson is consultant at Wedlake Bell