Scotland adopting spirit of 'the Code'
Legal Matters
KATIE THOMSON
THE 2007 Code of Leasing Business Premises in England and Wales (“the
Code”) published last March should by now be familiar to all in the
commercial property industry. The Code does not officially extend to
Scotland although its stated intent is that it should apply to the whole
of the UK. So what exactly is its status in Scotland?
Before I answer my own question it might be useful to consider what
impact the Code is having in England and Wales. The Practical Law
Company (“PLC”) ran a seminar in November last year to assess how the
code was working six months after its launch. The gist of the seminar
notes (available from PLC’s website) is that there’s growing awareness
of the Code but not positive shift to comply with it.
If this is the situation down south where the code does apply, and where
there’s the threat of litigation if the industry doesn’t comply, what’s
the prospect of its implementation in Scotland?
The first hurdle is its dissemination. My own experience is that the
word is out there but mainly among tenants and in particular the larger
UK-wide organisations. It’s these organisations who, in the face of
non-compliant leases, will seek to ameliorate their terms in light of
the Code.
The most common
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Katie Thomson - some landlords are 'leading the way'
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Code-compliant change being sought is in relation to insurance. In terms
of the Code a suspension of rent is to be available if the premises are
damaged by an uninsured risk (other than where caused by a deliberate
act of the tenant); and if the premises are destroyed by an uninsured
risk tenants are to have the right to terminate the lease unless the
landlord rebuilds at its own cost.
The impact of this change might seem remote if the lease in question has
a comprehensive list of insured risks.
However if risks such as terrorism or flooding become uninsurable or
prohibitively expensive (and leases oblige landlords to insure only
where insurance is available in the UK at commercially viable rates),
then the impact of these provisions will be felt. Whether this is just
or is to be encouraged is likely to depend on which stand point – that
of landlord or tenant – it’s being viewed from.
On the whole, the other Code provisions are less controversial in that
they are in line with the kind of changes tenants’ solicitors usually
seek to make to a lease. So what’s holding-up compliance? Returning to
PLC, they state
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that one subscriber legal firm feels its worth is measured by its
landlord clients on the ferocity of the lease negotiation battle
(however, the same can be said for tenants’ solicitors).
Surely a move to Code compliant leases would lessen the adversarial
nature of negotiations, speed them up and get the deal done sooner? To
this end, there are one or two landlords – who have signed up to the
Code down south – who are leading the way in Scotland by amending their
leases to be Code-compliant. They may currently be in the minority but
if institutional landlords start changing their attitudes and their
leases then surely the rest of the market will over time follow suit.
There’s a move for a Scottish version of the Code but that may be some
way off; in the meantime, it seems that the Code is starting to spread
its tentacles to Scotland.
For further information on any of these issues or for specific advice
please contact Katie Thomson on katie.thomson@
todsmurray.com
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