John Prescott's office is not expected to issue findings on its commercial leases consultation until early next year. The Office of the Deputy Prime Minister (ODPM) is waiting for the latest research from Reading University, which has been conducting an investigation into the property market and in particular upward-only rent reviews.
The ODPM launched the consultation in April with the property industry, which many feared was the first step towards legislation. It wants the industry to offer more flexible leases, negotiate fairly with tenants, and end upward-only rent reviews.
The news followed publication of an interim report by Reading University stating that many tenancies were still subject to upward-only rent review clauses and other restrictions in their leases. It also claimed that the property industry's voluntary code of practice, launched in April 2002 to provide guidelines to good practice negotiations, had failed to be effective.
The British Beer & Pub Association (BBPA) has submitted its response in which the ODPM asked it to look at six options. It supported option three: ban upward-only rent reviews subject to a floor of the initial rent.
Under this proposal there would be a need for primary legislation. This would require a periodic rent review to open-market rent. However the landlord would be allowed to require the tenant to pay the rent agreed at the beginning of the lease even if the review indicated a rent below that level.
There would also be a need for a statutory override of any lease provisions permitting only the landlord to initiate a rent review. This could be achieved through a mechanism similar to unfair contracts legislation.
A spokeswoman from the BBPA said: "Upward-only rent reviews are largely becoming a thing of the past in our sector, but it was felt that we should feed our views to the ODPM consultation as this is a far wider review covering all businesses."
The Federation of Small Businesses and the British Retail Consortium have also responded to the consultation. They sent a joint letter to Chancellor Gordon Brown urging the government to ban upward-only rent reviews. Martin O' Neill, the MP heading the Trade & Industry Select Committee investigation, has indicated that he is not concerned about upward-only rent reviews in the pub trade following pubco assurances.
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ODPM asks for more information on tenancies and leases (20 September 2004)