New rules designed to protect small firms which enter commercial leases are to be drawn up by the property market.

It comes as a response to the Government’s publicly stated wish for greater protection and clarity for Commercial leases and is seen as the industry’s final chance to self-regulate on the issue.

The Government had said it wanted to see  greater clarity in what they saw as over complex contracts and better information to tenants on what they can and cannot do and also the procedures and any penalties should they wish to change the terms of the lease or transfer it to another firm mid-contract.

The British Property Federation, the Law Society, The Royal Institution of Chartered Surveyors (RICS), and The British Retail Consortium have met with a number of leading business groups in the first steps to draw up the new guidelines.

One of the fundamental principles will be that landlords, letting agents and solicitors will be given a range of information which will not be required to be passed to tenants in order for the tenant to be aware of what is and is not negotiable in terms do the agreement.

It will also spell out what is and is not acceptable in terms of a range of contentious issues such as break clauses, and financial guarantees should the tenant wish to sub-let.

The proposals have the backing of many of the interested parties but the Government has made it clear that it will act if the market does not create its own solutions.

The Government has completed two separate studies on the industry’s previous efforts to resolve the issues over commercial leasing and the first six years ago found that just 14 per cent of tenants were aware of the existence of any code of practice. The second found that the awareness levels had increased by just eight per cent and it was tenants with five or less staff which were more likely to have no idea of their rights.

However there remain some issues as both the Law Society and the RICS will not make adherence to the code mandatory for their members instead saying they will seek to encourage their membership to adopt best practice.

Department of Communities and local Government Minister Yvette Cooper said earlier this year the industry would have until 2008 to change the way it approached the issue or it would step in.

“The government would like to see a code that addresses these issues adopted voluntarily by everyone but it is determined to see that the position for tenants is improved,” she told the House of Commons in March.

The BPF has conducted its own research which was released this month which found that two thirds of every lease contained no rent review and that the average lease for a small to medium, sized business was now 5.3 years.