RICS Leasing Code (2020): What UK Businesses Need Before Signing a Lease

If you’re about to sign a commercial lease, you’re probably focused on the exciting bits - getting the keys, fitting out the space, and opening the doors.

But a lease can lock your business into serious costs and obligations for years. That’s why it’s worth getting across the RICS Code for Leasing Business Premises (2020) before you commit.

In plain English, the RICS Code for Leasing Business Premises is a best-practice guide designed to make commercial leasing more transparent and fair. It’s not “the law” in itself, but it’s widely used in the market and it sets expectations about how landlords, tenants, and advisers should behave during a lease deal.

Below, we’ll walk you through what the Code for Leasing Business Premises 2020 means for you as a small business, what you should ask for, and what to check before you sign.

What Is The RICS Code For Leasing Business Premises (2020) - And Why Should You Care?

The RICS Code for Leasing Business Premises (2020) is a professional guidance document that promotes a more informed and balanced leasing process.

It’s mainly aimed at:

• Landlords and letting agents (to encourage transparent terms and reasonable negotiation behaviour)
• Tenants (so you understand what’s being proposed and the risks you’re taking on)
• Professional advisers (surveyors, solicitors and others involved in the transaction)

Even if your landlord doesn’t mention it, the RICS Code for Leasing Business Premises is still useful because it reflects what “good practice” looks like. If a deal feels rushed, unclear, or one-sided, the Code gives you a framework to push back and ask better questions.

Is The RICS Code Legally Binding?

Not usually. The Code isn’t legislation and it doesn’t automatically override the terms of your lease.

However, it can still matter because:

• it influences how reputable landlords and agents structure leasing discussions;
• it sets a benchmark for professional conduct; and
• it reinforces the idea that you should get proper advice before signing.

From your perspective, the big takeaway is simple: don’t treat a lease like a standard form document you can sign without careful review. It’s often one of the highest-risk contracts your business will enter into.

Start With Heads Of Terms: The Deal Should Be Clear Before The Lease Is Drafted

One of the main themes running through the Code for Leasing Business Premises 2020 is transparency upfront - especially at the heads of terms stage.

Heads of terms are a written summary of the commercial deal you and the landlord have agreed in principle, before the solicitors get into the detailed lease drafting.

They’re usually “subject to contract” (meaning not legally binding yet), but they’re still crucial because they set the direction of the entire lease negotiation. If heads of terms are vague, you may not spot a problem until it’s expensive and stressful to fix.

What Should Heads Of Terms Cover?

As a tenant, you’ll typically want heads of terms to cover:

• Rent (amount, frequency, VAT position, and any rent-free period)
• Lease length (and whether it’s flexible enough for your business)
• Break clause (whether you can end early and on what conditions)
• Repair obligations (is it full repairing and insuring (FRI) or limited?)
• Service charge (what it covers and how it’s calculated)
• Insurance (who arranges it and who pays for it)
• Security (rent deposit and/or personal guarantee)
• Use (what your business is allowed to do at the premises)
• Alterations and fit-out (what you can change and whether you need consent)
• Alienation (assignment/subletting rights if you need to exit)

If you’re negotiating a retail, office, studio, warehouse, or hospitality space, getting the structure right early can save you weeks of back-and-forth and reduce the risk of nasty surprises in the lease.

For many small businesses, it’s also a smart moment to get a lawyer involved - a Commercial lease review can help you spot deal-breakers before you’re emotionally (and financially) committed.

Key Lease Terms The RICS Code Highlights (And How They Affect Your Costs)

The RICS Code for Leasing Business Premises isn’t just about “being nice” in negotiations - it’s about ensuring tenants understand the true cost of occupation.

When you sign a lease, your total cost is usually much more than the headline rent. The Code pushes for clearer disclosure and better communication around these major risk areas.

Rent, Rent-Free Periods, And Rent Reviews

Rent might look straightforward, but you should always check:

• Is the rent exclusive of VAT (and will VAT be charged)?
• Is there a rent-free period for fitting out?
• Is there a rent review (and if so, how is it calculated)?

Rent review clauses can be particularly important in longer leases. For example, an “upward-only” rent review can mean your rent can go up but not down, even if the market drops.

Repairing Obligations And Dilapidations

Repair obligations are one of the biggest hidden costs in commercial leasing.

Many leases are FRI leases (full repairing and insuring), which often means:

• you’re responsible for repair and maintenance (and depending on the wording, this can be extensive); and
• you might have to pay for the landlord’s building insurance too.

At the end of the lease, the landlord may claim dilapidations (costs to return the premises to the required condition). This can be a shock if you didn’t fully understand the repair standard you agreed to.

Practical tip: ask whether a schedule of condition will be attached to the lease. This can help limit your liability by recording the condition of the property when you move in.

Service Charges (And Why You Should Ask For Detail)

If you’re in a building with shared areas (like a shopping parade, office block, or industrial estate), you’ll often pay a service charge.

You’ll want to understand:

• What services are included (cleaning, security, lifts, lighting, landscaping)?
• How costs are split between tenants?
• Whether there’s a cap or budget estimate?
• Whether major works can be passed through to you?

Even if your business can afford the current service charge, unpredictable increases can create cash flow pressure later - so clarity upfront matters.

Flexibility And Exit Planning: Break Clauses, Assignment, And Licences

Lots of small businesses sign a lease thinking they’ll “figure it out later” if they need to move, downsize, or change direction.

But with commercial property, your exit options depend heavily on what the lease allows.

The Code for Leasing Business Premises 2020 supports clear communication about these issues so tenants aren’t trapped unexpectedly.

Break Clauses: Your Safety Valve (If Drafted Properly)

A break clause lets you end the lease early - but many break clauses only work if you meet strict conditions (for example, giving notice correctly, paying all sums due, or handing back the property with vacant possession).

Common pitfalls include:

• missing the notice window;
• getting the notice wording wrong;
• not paying small disputed sums (which can invalidate the break); and
• not complying with reinstatement obligations before the break date.

If flexibility is important to you, get the break clause reviewed carefully before signing.

Assignment And Subletting: How You Transfer The Lease

If your business grows, pivots, or closes a location, you may want to:

• assign the lease (transfer it to a new tenant), or
• sublet (let someone else occupy while you remain the tenant).

Landlords often require consent and may impose conditions (like an authorised guarantee agreement (AGA), financial checks, or limits on who you can assign to).

This is where the “small print” really matters, and it’s a common reason we recommend getting legal help before signing rather than after.

Is A Lease Always The Right Option?

Not always. Depending on your situation, you might be offered (or prefer) a more flexible arrangement like a licence.

A licence is generally less secure than a lease, but it can suit short-term occupation, pop-ups, or situations where you’re testing a location.

If you’re weighing up flexibility, a Licence to occupy can be worth considering - just make sure you understand what rights you’re giving up (and what you’re still on the hook for).

Legal And Compliance Checks Before You Sign (Not Just “Property Stuff”)

When you’re rushing to secure premises, it’s easy to focus only on rent and location. But there are legal and compliance checks that can seriously affect whether the premises will work for your business.

Permitted Use And Planning

Your lease will usually restrict how you can use the premises. Even if the space is perfect, you need to confirm:

• the lease permits your intended use (and any future expansion of services); and
• you have any necessary planning permissions or consents.

For example, a coffee shop, salon, clinic, gym, or light industrial use can trigger different requirements. If you sign a lease and later discover you can’t lawfully operate the way you intended, you may still owe rent.

Alterations, Fit-Out, And Reinstatement

Most small businesses need to do some level of fit-out - signage, partitions, flooring, extraction, accessibility changes, electrical work, and so on.

Check the lease for:

• whether you need landlord consent for alterations (and any process or timeframes set out in the lease);
• whether you need to use approved contractors;
• whether you must remove alterations and reinstate at the end of the term; and
• whether there are restrictions on signage, shopfront changes, or external works.

Insurance And Risk Allocation

Commercial leases often allocate risks in ways that aren’t obvious at first glance.

For instance:

• the landlord may insure the building, but you pay the premium;
• you may need your own public liability and contents insurance; and
• you may be responsible for damage even if it wasn’t your fault (depending on the wording).

This is one of the reasons a proper review is so important - your lease isn’t just about paying rent, it’s a risk-management document.

Signing Correctly (So The Lease Is Actually Enforceable)

Commercial leases are often signed as deeds, and execution formalities matter. If you sign incorrectly, you can create delays (or worse, disputes about validity).

Before you sign, it helps to understand Legal signature requirements and whether you’ll need a witness.

In practice, many businesses also need to confirm Who can witness a signature (for example, the witness should be independent, over 18, and physically present when you sign).

If the lease is being executed as a deed (common for leases), make sure you follow the correct process for Executing a deed so you don’t get tripped up at the final hurdle.

Key Takeaways

• The RICS Code for Leasing Business Premises (2020) is a best-practice guide that encourages transparency and fairness in commercial leasing - and it’s a helpful framework for small businesses negotiating leases.
• Even though the RICS Code for Leasing Business Premises isn’t usually legally binding, it reflects market expectations and supports you in asking the right questions before you commit.
• Don’t rush the heads of terms stage - it’s where you can lock in key commercial points like rent, break options, repairs, service charge, and deposit/guarantee requirements.
• Watch out for “hidden” costs and liabilities, especially repairing obligations, service charges, insurance arrangements, and dilapidations at the end of the lease.
• Build in flexibility where you can - break clauses, assignment, and subletting terms often decide whether you can exit without heavy losses if your business plans change.
• Check legal and operational details before signing, including permitted use, fit-out/alterations consent, reinstatement obligations, and signing formalities (especially if the lease is a deed).
• If you’re unsure, it’s worth getting a lawyer to review the lease before you sign - fixing problems after exchange is usually much harder and more expensive.

This article is general information only and isn’t legal advice. If you’d like help reviewing a commercial lease before you sign (or negotiating heads of terms so you’re protected from day one), you can reach us at 08081347754 or team@sprintlaw.co.uk for a free, no-obligations chat.