A new year! A new start?

How many of you sitting at home have spent hours day-dreaming of opening a new business, embarking on a new venture and changing the quality and expectations of your home and working lives? How many of you have great ideas, life long ambitions and dreams and a longing to succeed in your own business enterprise?

So what are the factors that make your dreams fizzle away?

Clearly the financial hurdles involved in beginning and maintaining a new business can and will be daunting and the assistance of an experienced accountant and a friendly bank manager can’t be overestimated.

Perhaps you are worried about your lack of experience? Are you overwhelmed at the thought of having to deal with traders, suppliers, distributors; people with experience, who know exactly what they are doing. With hard work on your part, good research and the correct support your lack of experience can be quickly conquered.

An early worry for the budding entrepreneur will be the leasing of trading premises and the inevitability of the dreaded Landlord / Tenant relationship. You are at the stage of your business development when your lack of experience could leave you vulnerable to the unscrupulous Landlord; Heads of Terms negotiated with the Landlord will compel you to meet these as lease obligations for the whole duration of the lease term.

So where do you turn for help?

Seeking advice from business professionals such as surveyors, solicitors and accountants can be particularly useful at the pre negotiation stage but very few tenants choose to take advice at this point. Invariably the Tenant will instruct a solicitor having already negotiated the lease terms.

The prospective Tenant will enter into negotiation with the Landlord, either directly or through the estate agent. A well prepared tenant, having researched the issues involved in the leasing of commercial premises beyond say that of the Rent and Duration of Term, is likely to understand the concepts of security of tenure, rent review, and alienation. An unprepared tenant is likely to be baffled by some aspects of the negotiation and is likely to meekly accept the Landlord’s demands.

The disparity in the Landlord and Tenant relationships has been widely recognised for many years. In 1995, the first edition of the Code of Practice for Commercial Leases in England and Wales (1995 Code) was published as a voluntary agreement between professional and industry bodies. The 1995 Code was supported by the Government as an initiative by the property industry to regulate itself, address concerns over a perceived inflexibility in commercial lease terms and to avoid a legislative solution as proposed by the Government.

The 1995 Code did not have any apparent impact on market practice, and the Government again threatened legislation. The second edition of the Code was published in April 2002 (2002 Code). The 2002 Code had made a greater impact than the 1995 Code in that it had been more widely circulated. Even where it was known about, however, the 2002 Code was having little direct impact on individual lease negotiation.

It is against this background that the Code for Leasing Business Premises in England and Wales 2007 (Business Lease Code) was published on 28 March 2007 with the objective of achieving a fairer balance between the landlord and the tenant, and a greater flexibility in commercial lease terms. If the Business Lease Code fails to change practice in England and Wales, the Government has said that it will intervene with legislation.

The effectiveness of the introduction of the Business Lease Code is not yet known. At Jackamans we have yet to come across a Landlord or Tenant who has asked if their particular Lease is to be Lease Code compliant!

The Code includes an extensive Occupier (Tenant) Guide, a Landlord Guide and an extensive set of Model Heads of Terms. The practical effect of such a Code is that a Tenant forearmed with the Lease Code can no longer be ignorant of issues involved when negotiating Heads of Terms.

So if you are new to all of this, temper your inexperience by reading through the available material. A glance at the Model Heads of Terms may well raise issues that you were unaware of. You are now in a position to ask the right questions and seek the correct advice prior to negotiating the lease terms.

Remember, committing yourself to a 3 or 5 year lease (or longer) without having fully investigated the relevant issues at the negotiating stage may leave your business vulnerable to the Landlord’s demands during the early years of your business venture.

The Code for Leasing Business Premises in England and Wales 2007 (Business Lease Code) can be downloaded from www.leasingbusinesspremises.co.uk or alternatively please contact me by email or phone for a copy of the Model Heads of Terms.