The government this morning said it would not be legislating against upward-only rent reviews.
In a statement, Yvette Cooper, the parliamentary under-secretary of state at the Office of the Deputy Prime Minister, said: “We do not propose to legislate against upward-only rent review clauses at present.”
Cooper added that the decision had taken into account Reading University’s ODPM-commissioned final report into the matter, published last month, which found that tenants are far more concerned about lack of flexibility in assignment, subletting and the range of alternative lease prices.
The government said it would focus on these issues, reviewing the “law of assignment and subletting to ease the position for tenants but not jeopardise property investment”.
The statement added: “The Reading report shows that their impact has been diminishing, as fewer leases contain any form of rent review provisions.”
According to the report, fewer than half of all new leases contain rent reviews.
Cooper also called on the property industry to “undertake a joint review of the code of practice, to carry out a renewed campaign to disseminate the code and provide an effective mechanism for dealing with complaints.”
However, the government has reserved the right to act on upward-only rent reviews in future. “We will continue to monitor the situation and retain the option to legislate in future if necessary.”
The move was broadly welcomed by the British Retail Consortium (BRC), which has been lobbying for the government to legislate against upward-only rent reviews.
Dr Kevin Hawkins, BRC director general, said: “The BRC has always said that its preferred outcome was an effective voluntary code, which delivers much-needed flexibility in commercial leases.
“The government has now told the property industry to get its act together and make the present Code work.
“We particularly welcome the government’s commitment to review the law on assignment and subletting and to retain the option to legislate on upward only rent reviews in the future.
“In the meantime, the property industry’s performance will be under close scrutiny.”
The BRC added that it would “support any practical initiative, which will promote awareness of the Code, particularly on the part of smaller retailers.”
The BPF also welcomed the move as a “common sense” approach to the outstanding issues affecting the market.
Liz Peace, chief executive, said: “We welcome the recognition from government that this industry has made significant strides towards providing greater flexibility since this issue first appeared on the radar screen a decade ago.
“I hope we have shown there is a place for upward-only rent reviews in the UK which, when used appropriately, underpin some of the strengths of our market and often provide benefit to occupiers.
“However, such leases are now in the minority, and in terms of variety, the UK property industry is already providing a far broader choice than is often found abroad.”
Peace continued: “What it illustrates more than anything is that, ultimately, our agenda and government’s are shared: to create a competitive property environment, which is fair on occupiers, provides decent returns for savers, and helps create breathtaking developments and regeneration.”
References: EGi Legal News 15/3/05
