Developing close co-operation with tenants through property and customer management processes will yield benefits, says Peter Best
The commercial property industry's third attempt to demonstrate to the UK government that it has left behind its traditional feudal basis of operating landlord and tenant relationships was signified by the launch of the new Code for Leasing Business Premises in March this year.
This third edition of the Code for England and Wales follows two previous attempts that are considered to have enjoyed only mixed success, and which many commentators rather harshly suggest have been widely ignored by both landlords and tenants of business premises. The new code is still voluntary and, despite the explicit backing given to it by all of the leading property industry bodies as well as the UK's top property owning organisations, there is no guarantee that the new code will be seen any more successful than the last one.
The Commercial Landlord Accreditation Scheme (CLAS) was launched in July and results from ideas put forward by the Owners & Occupiers Property Forum to give the Code more teeth. Standing behind the encouragement of the industry to change its ways and become more flexible and responsive to tenant businesses' needs is the government's threat to impose changes by legislation should the code fail to achieve its aims. This time the government wants to see self-regulation by the industry in translating the code's recommendations into action.
CLAS is the response to this challenge. It consists of a self-regulatory scheme to support and promote good practice in commercial property markets. A pre-requisite for membership is that a landlord agrees to follow the ten-point requirements for compliance with the Landlord's section of the 2007 Code. These requirements cover conduct and practice for the negotiation of lease terms and the ongoing management of the landlord and tenant relationship through matters such as repairs, alterations, changes of use, insurance and service charges. The code's aims are helping to promote efficiency and fairness in landlord and tenant relationships.
It is recognised that most landlords will have difficulty in being 100% compliant with the strict letter of the code in respect of every lease. The most important thing is the fair conduct of the parties. The code allows for departures from its provisions in particular cases providing that landlords make it clear that is what they are doing in every instance and that the reasons are explained.
For example, a particular property fund might be created to allow investors to gain exposure to long-term secured rental income, meaning that it will only be able to hold properties with leases of 15 years or more and will be precluded from offering shorter terms. The landlord fund will therefore depart from the code's requirements to offer rents for different lease terms if requested to do so by a prospective tenant. It will need to explain the reason why to comply with the spirit of the code.
A property owner who becomes a member of the scheme is able to display a scheme standard mark on letter headings and in promotional material, effectively a stamp of quality. The scheme is designed to have few rules, making it simple to understand, so landlords should not be discouraged from signing up to it.
For the scheme to be self-regulatory, however, it does need to backed by the power to impose sanctions against those who breach the rules. The CLAS has sanctions that range from a private reprimand by a case investigator through to a public reprimand (‘naming and shaming'), suspension of membership or even removal of scheme membership altogether. Ultimate responsibility for adjudicating complaints against scheme members is given to a standards board consisting of an independent chairperson, three representatives each from the landlord and tenant sides of the industry and three further independent members.
CLAS is up and running, Mavis McDonald has accepted the chairmanship and all of the other board appointments have been made. At the time of writing 18 organisations have either signed up to membership or have committed to do so once they have completed work to align their internal procedures with the CLAS requirements. For some, this means establishing a documented complaints procedure.
It is PRUPIM's view that developing a close co-operation with tenants through the property and customer management process creates win-win situations which logically lead to better results. Put simply, this is one of the components of good asset management. This approach is therefore aligned with the ambitions of CLAS and the Lease Code. PRUPIM is therefore amongst the first property investment managers to sign up to CLAS.
One of the difficulties faced by CLAS and the lease code is its adoption by all corners of the commercial property market and, as a representative of major property-owning funds, we are happy for PRUPIM to encourage and lead by example.
The commercial property industry has moved a long way forward since the first edition was published. There is more flexibility in leases terms, and certainly leases are a lot shorter in average duration. Many landlords and investors have significantly improved their service delivery through professional facilities management. This is supported by the widespread adoption of performance measures and standards, and more robust technology.
PRUPIM regularly participates in discussions with other leading players in the industry to look at ways of improving the customer service offering, one such forum being provided by REAL Service, a group that benchmarks service quality in the property industry and also includes among its members the likes of Land Securities, British Land, ING, Legal & General and leading managing agents such as DTZ, CB Richard Ellis, Jones Lang LaSalle, NB Real Estate and Drivers Jonas, to name but a few.
If the accreditation scheme encourages the continuation of this trend, then it will be seen to have achieved success in supporting the underlying objectives of the lease code. It is hoped that the industry will give its full and enthusiastic backing to CLAS.