Code for Leasing Business Premises Flashcards
What is the primary purpose of the Code for Leasing Business Premises?
A. To improve the fairness and transparency of lease negotiations
B. To enforce rent control on commercial property
C. To create legally binding lease templates
D. To set rent levels for retail units
A – To improve the fairness and transparency of lease negotiations
Explanation: The Code aims to level the playing field between landlords and tenants and promote clearer, fairer lease terms.
Who is directly bound by the Code?
A. All commercial landlords in the UK
B. RICS members and RICS-regulated firms
C. All tenants of commercial premises
D. Solicitors acting in property transactions
B – RICS members and RICS-regulated firms
Explanation: The Code is binding only on professionals who are part of RICS or regulated by RICS — not on all market participants.
Under the Code, what must RICS members do when negotiating with an unrepresented tenant?
A. Inform the tenant about the Code and recommend professional advice
B. Proceed only with legal representation
C. Offer a rent-free period automatically
D. Refer the tenant to the Land Registry
A – Inform the tenant about the Code and recommend professional advice
Explanation: This is a mandatory requirement — unrepresented parties must be informed of the Code and advised to seek help.
What should be included in the heads of terms according to the Code?
A. Term length, break clauses, rent review terms, and repairing obligations
B. Only the rent and term length
C. Just the tenant’s obligations
D. Only the landlord’s consents
A – Term length, break clauses, rent review terms, and repairing obligations
Explanation: The Code requires comprehensive heads of terms to streamline legal drafting and protect both parties.
A landlord proposes a full repairing obligation for a 6-month lease on a poorly maintained property. What does the Code recommend?
A. This is fine if rent is discounted
B. The obligation should reflect the term length and property condition
C. The tenant must accept the terms or withdraw
D. The landlord should require a deposit instead
B – The obligation should reflect the term length and property condition
Explanation: Repair obligations must be reasonable. The Code discourages excessive obligations, especially on short-term leases.
A rent review clause based on turnover is agreed. What must the heads of terms include under the Code?
A. That rent is fixed for the first year
B. The rent review method and frequency
C. That the landlord will choose the valuation date
D. That reviews must be every three years
B – The rent review method and frequency
Explanation: Rent review details — such as frequency and basis — must be clearly stated upfront in the heads of terms.
A tenant agrees to a qualified repairing obligation. What must be provided to limit their obligations fairly?
A. A rent-free period
B. A landlord guarantee
C. A schedule of condition
D. An insurance valuation
C – A schedule of condition
Explanation: A schedule of condition records the property’s state at lease start, ensuring tenants aren’t liable for pre-existing defects.
A letting agent includes a complex break condition that wasn’t in the heads of terms. What does the Code say?
A. It can be included in a side letter
B. The tenant can challenge it in court
C. Break conditions must be stated in the heads of terms
D. Conditions are void if not disclosed
C – Break conditions must be stated in the heads of terms
Explanation: The Code emphasises transparency. Break clauses should not contain hidden or difficult conditions not agreed early on.
The lease includes a rent-free period during the tenant’s fit-out. What should be done according to the Code?
A. It must be left to negotiation later
B. It is assumed and does not need stating
C. It must be documented in the heads of terms
D. It should be noted in the tenant’s business plan
C – It must be documented in the heads of terms
Explanation: Rent-free periods are a key commercial term and should be agreed and recorded from the outset.
What does the Code recommend if the premises are damaged by an insured risk?
A. The tenant must terminate the lease
B. The landlord must replace the property
C. The tenant must cover loss of rent
D. Rent should be suspended unless the tenant caused the damage
D – Rent should be suspended unless the tenant caused the damage
Explanation: The Code protects tenants from paying rent for unusable space, unless the damage is their fault.
A lease is granted without the landlord obtaining necessary lender consent. What does the Code require?
A. Consent must be obtained before granting the lease
B. Consent can be waived if rent is paid
C. Consent must be post-dated to completion
D. Consent is optional in short leases
A – Consent must be obtained before granting the lease
Explanation: Landlords must get any necessary third-party consents (e.g. from lenders or superior landlords) before leasing.
During rent review, which of the following is good practice under the Code?
A. Reviews are optional under 3 years
B. The landlord sets the new rent
C. Rent can always decrease below passing rent
D. Review assumptions and disregards must be clear and reasonable
D – Review assumptions and disregards must be clear and reasonable
Explanation: The Code promotes clarity and fairness in rent review clauses, especially when applying open market methods.
