Recommendation 8 of the Lease Code is remarkably clear and simple as to what controls should be imposed over alterations. Such controls should be no more restrictive than is necessary to protect the value, at the time of the application, of the premises and any adjoining or neighbouring premises of the landlord.

The Lease Code continues by providing that internal non-structural alterations should not be subject to consent as such, but should simply be notified to the landlord. Only if non-structural alterations could affect the services or systems in the building should they be subject to a consent regime.

At the end of the term, removal of permitted alterations should be only requested where it is reasonable to do so. A change in the Lease Code from the 2002 Code is to prescribe that landlords should notify tenants of their requirements for reinstatement at least six months before the termination date.

The Leasing Business Premises in England 2007: Model Heads of Terms (Model Heads of Terms), which forms part of the Lease Code, uses a checkbox matrix, which divides alterations into four types:

In respect of each of those four types of alterations, the model heads of terms ask the parties to consider:

One of the greatest criticisms of current leasing practice I have is the use of the landlord's standard form lease, which is churned out without any real thought of its application. This is poor lawyering and certainly not in the landlord's best interests. The lease should be fit for purpose. It should be drafted to fit the situation: that is to fit the property that is being leased.

It is not possible, practical nor sensible to suggest that the answers to the questions in the matrix in the Model Heads of Terms in the matrix will be the same in every single case. For example:

Before looking at the four classes of alterations in the Model Heads of Terms, think what are alterations. They are wider than improvements.

One commentator suggests that the purpose of the control on alterations is to ensure that the tenant does not change the nature of the landlord's property or imperil its stability or safety.

Turning to the four classes of alterations set out in the model heads of terms:

Don't forget section 19 of the Landlord and Tenant Act 1927, which provides that where the covenant is qualified the landlord's consent cannot be unreasonably refused if the proposed alteration amounts to an improvement. If the statutory scheme, taken as a whole, is more favourable to the tenant than the contractual provisions of the lease then the statute rules. I would suggest that to be Lease Code compliant the lease should reflect the statutory rules. Against that background I would also suggest that a qualified consent is unlikely to be Lease Code compliant.

Section 3 of the Landlord and Tenant Act 1927 allows "improvements" even where the lease has a total prohibition. Because section 3 is dependent upon various procedures being followed, I would suggest that to be Lease Code compliant we do not need to replicate in the lease a section 3 type procedure.

However, whenever landlords' lawyers are drafting leases, I hope that they will remember the statutory provisions and not include in the leases contractual provisions which will in any event be overridden by operation of this type of statute.

It is also worth reminding ourselves that where we are looking for here are alterations which can only be undertaken with consent, such consent not to be unreasonably withheld. That does not mean that the landlord must automatically consent. For example, it is clearly reasonable, and the courts have supported this, for a landlord to refuse consent to alterations if he fears that the proposed alterations will cause structural damage. It is sensible, and this is reflected in the Lease Code, that the landlord retains an element of control. The Lease Code is seeking is to strike a balance between apparently competing interests of landlord and tenant.

Against this background there will be obligations in the lease about repair, about compliance with statute, compliance with health and safety, compliance with planning, environmental and the rest.

It is not uncommon for a lease to include a general condition obliging the tenant at the end of the term to reinstate all alterations that have been made, if so required by the landlord. The insertion of such a general condition is intended precisely to avoid the tenant arguing that such an obligation is not reasonable.

It has been successfully argued that such a general obligation has the effect of reducing the rent payable by the tenant on a review or on a renewal. It is, therefore, an onerous provision which does have an adverse effect on rent, so a landlord should be happy to follow the Lease Code and agree in the lease only to require reinstatement when reasonably required.

If the tenant does not reinstate, landlords should remember that the damages which they can claim will be limited to the reduction in the value of the landlord's reversionary interest. If there is no such diminution in value, the damages will be nominal.

Is six months prior notice adequate? Is it too long?

Some landlords will be very reluctant to agree to six months. Why? They are concerned that they may not know six months before the end of the term whether they will want all the alterations removed.

The need for reinstatement might depend on whether the incoming tenant has a need for the premises as altered or would prefer some other fit-out. If the present tenant has cellularised the office space and the incoming tenant wishes to have a more open office then the landlord would prefer the reinstatement works to be done at the tenant's cost and more than likely by the tenant before the lease has ended so that the property can become income-producing as fast as possible.

A line has to be drawn somewhere. The notice to reinstate has to be given sufficiently early to allow the tenant to have reasonable time to arrange for the works to be done and to actually do the works.

Although the recommendation in the Lease Code is that this notice is given six months before the termination date, there may be specific reasons on a specific type of fit-out and for a specific type of property for a different period, longer or shorter. There has to be a reason if you are going to depart from the Lease Code. If you have a reasonable reason then I can't see why the parties should not depart from the Lease Code.

Recommendation 8 of the Lease Code does not say a great deal about change of use. It provides that landlords' control over changes of use should not be more restrictive than is necessary to protect the value, at the time of the application, of the premises and any adjoining or neighbouring premises of the landlord.

In my submission, the issue is what is reasonable and what is not reasonable?

In deciding that question we need to consider:

The user must accommodate the tenant's intended business needs. Further, it must be wide enough to accommodate any developments or enhancements to that business.

The user must not be so restrictive that it reduces the marketability of the lease should the tenant wish to dispose of the lease, either because its business is so successful that it outgrows the property, or because this unit is not successful.

Remember the link with rent review. If the rent review assumes a user which is wider than the actual contractual use, this may be unreasonable if it means that the tenant would be paying more rent following the review than the unit is worth with the actual narrower permitted user.

The landlord does not wish to discover that the property is being used for a purpose which adversely affects the value of his property. In my submission it is reasonable to include restraints that ensure that the landlord can veto a change of use that might reduce the rent attainable on review or renewal. It is probably also reasonable for the landlord to exclude uses or activities that might affect the future value of his property, for example, uses such as an abattoir, possibly use as a dry cleaners, possibly use as a charity shop.

Even if the landlord has not already entered into contractual arrangements with other tenants to prevent the use of this property by a particular trade or occupier, under good estate management principles the landlord may wish to ensure a good mix of tenants. These sort of restraints are more likely to be reasonable and, therefore, Lease Code compliant, in a shopping centre, possibly, depending on the factual matrix, in a parade of shops all owned by the same landlord, but probably not reasonable for a stand-alone unit.

As you will recall, a material change of use from one use class to another use class where both are in the same use class order, does not require planning permission. Therefore, quite often a lease, particularly a Lease Code compliant lease, will permit the tenant to use the property for any use within one or more use classes. However, this is not a panacea for every property. Inserting such a user clause in the draft lease should not be the end of the end of the lawyer's thought processes.

My submission is that it is unreasonable for Lease Code compliance purposes if the user restraint is expressed in the positive.

This is because of the possibility that a positive obligation:

implies or attempts to imply an obligation on the tenant to keep the property open.

To follow the underlying principles of the Lease Code and to be Lease Code compliant, in my submission, requires the user control to be expressed in the negative:

If, in particular circumstances such as in a shopping centre, it is reasonable for the landlord to impose an obligation on the tenant to keep open, then there should be a separate clause that would set out reasonable exceptions from such obligations such as for refitting, etc.

How should the user restraint be qualified?

This is less of a problem if the user clause is widely drawn. For example, "otherwise than for a use which falls within A1, A2, A3, A4 or A5 of the Use Classes Order". There is sufficient flexibility, in my view, for the lease to be Lease Code compliant.

The more narrow the permitted use, however, the more important this point becomes.

As a starting point, in my submission, a qualified obligation is not Lease Code compliant. Simply stating that a change of use requires the consent of the landlord is not sufficient. This is because, unlike with alienation, there is no statutory intervention implying that such consent cannot be unreasonably withheld.

Accordingly, if the permitted use is restrictive then the clause must be fully qualified: there must be a specific provision that landlord's consent to a change of use either to any other use or to another use within a specified class of use, is not to be unreasonably withheld. This conclusion is in my submission reinforced by the new reference in recommendation 8, which sets out what is necessary to protect the value of the landlord's property "at the time of the application".

As with so many provisions in a lease, the arrangements recorded in respect of alterations and use must be consistent, intellectually and practically, with the other provisions of the lease.

An apparent freedom may be completely illusory when tied in with a more restrictive provision elsewhere.

A wide alienation clause tied in to a narrow use clause is an illusory freedom to assign. A narrow use clause but with the assumption of a wide user in the rent review results in the tenant perhaps paying more rent than is reasonable in the light of his actual lease terms and therefore may reduce the marketability of the lease.

The whole driver behind the Lease Code and the Government's threat to legislate unless the property industry puts its house in order, is to stop these types of games. It may be very amusing for the lawyers and surveyors, and it can be highly profitable when professionals are paid by the hour. However, surely we are all grown up enough and professional enough to realise that such gamesmanship in the end does not ensure our continuing professional reputation. Unless we wake up to this and act reasonably and professionally, we will rightly suffer the wrath of Government and be subject to unwelcome and unhelpful legislative restraints.

The Lease Code is trying to enable the parties to draw a line in the sand to say what has happened historically is not what has to happen now.

Unless the industry positively and with enthusiasm accepts this new regime,

As the other speakers have said this evening, we are in the last chance saloon. We should not be afraid of the Lease Code and the changes in practice which it envisages.

Instead, landlords and their advisers, their surveyors and lawyers should be welcoming the changes because, if they are adopted, lease negotiations will be reduced, disputes and difficulties with tenants will be reduced, there will be lower management costs, there will be a less confrontational relationship between landlord and tenant and we will achieve the holy grail of a true partnership between the provider of the facility, the offices, the shop, the industrial unit and the user of the facility, the tenant.

Twenty years ago the industry feared that shorter leases, leases of less than 25 years, would see the end of property investment in this country. Twenty years ago many thought that abolition of original tenant liability would see the end of property development in this country. I recall having a huge row at a private showing at the Royal Academy, with David Branson, who at the time was head of the property group at Nabarro Nathanson, when I dared to suggest that the abolition of original tenant liability would be a good thing. We now have shorter leases. We have now had the Landlord and Tenant (Covenants) Act 1995 in force for nearly 12 years. The sun still shines, land values have increased, rental levels are still extremely high.

Rather than fearing the changes which the Lease Code demands, I implore landlords and their representatives here to enthusiastically accept and adopt the principles in and underlying the Lease Code.