The challenge of self-regulation in commercial property leasing: A study of lease codes in the UK

UK Government policy to address perceived market failure in commercial property leasing has largely been pursued through industry self-regulation. Yet, it is proving difficult to assess whether self-regulation on leasing has been a “success”, or even to determine how to evaluate this. The purpose of this paper is to provide a framework for this and a clearer understanding of self-regulation in commercial leasing. A literature review suggests key criteria to explain the (in)effectiveness of self-regulation. UK lease codes are analysed in the light of this literature, drawing on previous research carried out by the authors on the operation of these codes. Lease codes appear to be failing as an effective system of self-regulation. While there are influential market actors championing them, the fragmentation of the leasing process lessens this influence. The structures are not there to ensure implementation, monitor compliance and record views of affected stakeholders. This work adds to the literature on self-regulation in general, and provides an insight into its operation in a previously unexplored industry. Research is needed into the experience of other countries in regulating the property industry by voluntary means. There are institutional limitations to self-regulation within the property industry. This has implications for policy makers in considering the advantages and limitation of using a voluntary solution to achieve policy aims within the commercial leasing market. This paper provides a first step in considering the lease codes in the wider context of industry self-regulation and is relevant to policy makers and industry bodies.