HC Deb 24 March 2003 vol 402 cc82-3W
Mr. Gareth Thomas

To ask the Deputy Prime Minister if he will introduce legislation to outlaw private clauses in commercial leases; and if he will make a statement. [103223]

Mr. McNulty

In the early 1990s, there was considerable concern about the use of confidentiality clauses in commercial leases. However, the University of Reading 2000 report for the Department of the Environment, Transport and the Regions on leasing flexibility found that use of confidentiality clauses in commercial leases was rare.

Banning confidentiality clauses in commercial leases would be a serious interference with freedom of contract, which the Government would not undertake lightly. Nevertheless the Office of the Deputy Prime Minister would be concerned at any re-emergence of this practice, under which landlords concealed concessionary terms given to tenants from the general market in order to sustain unrealistically high rents.

The Royal Institution of Chartered Surveyors have issued guidance to surveyors that parties to commercial leases should avoid unnecessary secrecy in their transactions, in the interests of market transparency. In the first instance the Office of the Deputy Prime Minister would look to the professional bodies to discourage the use of confidentiality clauses.

Mr. Gareth Thomas

To ask the Deputy Prime Minister what research he is conducting into the effectiveness of Government guidance on upward-only rents for commercial premises; and if he will make a statement. [103224]

Mr. McNulty

The property industry's 2002 Code of Practice for Commercial Leases in England and Wales commits landlords and their funders to provide a choice of leasing terms whenever possible, including alternatives to upwards only rent review clauses.

The Office of the Deputy Prime Minister awarded a contract last July to the University of Reading to gauge the impact of the Code. This will help the ODPM to assess, at the end of a two-year period, whether to continue relying on voluntary measures to produce more choice and flexibility in the property market or to introduce legislative controls.

The university will assess, over a two-year period, whether the Code has provided a more flexible commercial property market. The contract requires the university to submit a final report by 31 December 2004 with an interim report by 31 December 2003. The specific objectives of the research are:

  1. (a) to evaluate changes in commercial property market conditions over the review period (April 2002–April 2004);
  2. (b) to measure flexibility in the commercial property leasing market over the review period, using the findings of the University of Reading report on the 1995 Code of Practice* as a baseline;
  3. (c) to measure the degree of choice in the commercial property leasing market over the review period, focusing particularly on the availability of alternative options to upward only rent reviews;
  4. (d) to measure the degree of awareness of property matters among occupiers of commercial property, concentrating particularly on small businesses; and
  5. (e) to assess how far the 2002 Code of Practice had influenced the commercial property leasing market over the review period.

The Office of the Deputy Prime Minister has made it clear that if the research shows there are no signs of change, legislation will be on the agenda.

* Monitoring the Code of Practice for Commercial Leases (2 vols), The University of Reading in association with Sanderson Townend and Vail Williams Chartered Surveyors, for the Department of the Environment, Transport and the Regions, London, April 2000, 36.

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