The RICS has just published the new "Code for Leasing Business Premises" (the New Code) which is, at least in part, mandatory for RICS members. This replaces the 2007 Lease Code which was wholly voluntary.
The mandatory requirements must be complied with on pain of legal and/or disciplinary consequences. It may result in a finding of negligence against a surveyor. And any departure is unlikely to find favour at court where a provision is disputed.
While there are also best practises, space only allows the “must-dos” required in the heads of terms. Nevertheless, you would be better to seek to adhere to those “should-dos” if you want a smooth transition from first meeting to completion.
The WRITTEN (key word - it's required) heads of terms must state:-
· Premises The extent of the premises with a Land Registry compliant plan if the lease is registerable (i.e. not the back-of-a-fag-packet sketch still found on some older leases)
· Length of term The proposed duration of the lease, whether rights of renewal under the 1954 Act are to be included or excluded and details of any break rights or options for renewal
· Rent deposits and guarantees
· Rent and rent review The amount of rent and the instalment frequency, whether the landlord intends to charge VAT, any rent-free period or other inducement and the basis of any rent review and review dates.
· Assigning, subletting, charging and sharing
· Service Charges, insurance and other outgoings
· Use and alterations The initial use or range of uses to be permitted, the restrictions to be imposed on different types of alteration and details of any initial alterations or fit out to be carried out by either party.
· Insurance and damage Whether the tenant is to pay towards insurance premiums.
· Energy efficiency Which party is responsible for obtaining an EPC if any is needed during the term.
The WRITTEN heads of terms must be agreed before the first draft of the lease starts its to-and-fro journey.
One more thing. Don’t later argue that you overlooked a point, or it was too hard etc.. For one thing there are no seismic changes from the Lease Code. You have had 13 years to get used to that. For another, the RICS has made an updated template for heads of terms that mirrors the New Code; and a heads of terms checklist just to make sure you haven’t missed anything. No excuses!
If this is of interest, I'd love to hear from you. Feel free to contact me on 07816 755372 or by e-mail me at Luke.email@example.com and let me know how I can help.
Sections within professional statements that use the word ‘must’ set mandatory professional, behavioural, competence and/or technical requirements, from which members must not depart... Sections within professional statements that use the word ‘should’ constitute areas of good practice. RICS recognises that there may be exceptional circumstances in which it is appropriate for a member to depart from these provisions – in such situations RICS may require the member to justify their decisions and actions.