The British Property Federation has called for every small business to receive a copy of a code of conduct on leasing after a report by the University of Reading found it was not being used widely enough.
The Government has backed the call with Housing Minister Ian Austin stating “small business tenants are not receiving any substantive information on the code from any source” although he did add “some well-advised major tenants” were using the code in negotiations. Austin warned if the code, which was voluntarily introduced by the property industry in 2007, was not used effectively the Government would have to legislate for more flexible lease arrangement.
Ian Fletcher, director for commercial policy at the BPF, explained: “We would like to see every small business receiving a copy of the code at the right time, but I don’t think we should underestimate the challenge that represents and hard work it requires from all parties concerned.
“What is also important is businesses are getting the best lease for their needs and a flexible approach when things get tough. On both scores the industry, despite facing very tough times itself, is providing unprecedented levels of support for its customers.
“There would be a lot more businesses going to the wall during the recession if that was not the case and the industry deserves credit for that.”
Dan Bayley, head of lettings & sales at BNP Paribas Real Estate, said: “The lease code is essential for landlords and tenants alike.
“Tenants need to know what they are signing up to, and landlords should actively ensure that all tenants have a copy and understand their lease.”
Paul Arnell, associate from Drivers Jonas’ professional services team, added: “It is perhaps unsurprising the Government is disappointed at the take up of the Code given it is mostly only the larger and well-advised tenants which tend to use it during negotiations.
“However, during the downturn, where landlords are struggling to attract and retain tenants, it seems as though market forces will encourage the tendency towards flexibility rather than the Code.
“There is no doubt tenants need to be smarter when it comes to negotiating new terms for leases and it is imperative that they seek advice from a Chartered Surveyor to ensure the rent they pay is in line with the current market conditions.
“It is not enough just to find out how much other similar units are being marketed for – asking rents and agreed rents are very much different and there can be all manner of incentives hidden away in the detail.
He added: “The tenant not only owes it to himself to take advice but also to the other tenants, as a bad deal can then be used as evidence by the landlord to push up rents at rent review and lease renewal.”
“The industry as a whole will continue to resist unnecessary legislation which will ultimately hinder the ability for true flexibility and undoubtedly cause financial problems for smaller landlords and those providing funding to them.
“For example, the Government’s threat to ban upwards only rent reviews, if introduced would deliver a hammer blow to the value of most property portfolios and most likely lead to an exodus of investment in UK property to overseas.”