Transcript Policy making without legislating: the self

Policy making without
legislating: the self-regulation of
commercial property leasing
Cathy Hughes and Neil Crosby
21 July 2015
© Henley Business School 2008
www.henley.reading.ac.uk
Regulation of the UK leasing
market
• Little regulation in the commercial sector
• Policy interest: Enterprise and productivity
– Do leasing practices provide barriers to efficiency and flexibility?
– This question has been asked continually since 1990!
• Self-regulation has been the ‘solution’ since 1995
– Code of Practice for Commercial Leases v1 (1995)
– Code of Practice for Commercial Leases v2 (2002)
– Code of Practice for Commercial Leases v3 (2007)
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Has self-regulation worked?
• University of Reading research has found market-led
changes to leasing practices but also……
• Little awareness of codes and little direct influence of
them on lease negotiation and management.
• Government is not happy.
“Except for some well-advised major tenants, the code is not a primary tool
for the negotiation of new leases.
If parties do not know about the code and do not use it, it will have no
impact. The property industry has asked us not to legislate in this area, and
we have held back to give the 2007 Code a chance to work. But if the more
substantive research shows that the market has not responded, legislation
is bound to come back on to the agenda.”
The Parliamentary Under-Secretary of State for Communities and Local Government (July 2009)
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Can self-regulation of
commercial leasing ever work?
The aim of the paper is to begin to answer this by:
1. Reviewing the wider literature on self-regulation in
other industries
2. From the review, generating key criteria to explain when
self-regulation is effective
3. Assessing UK commercial lease codes against these
criteria
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Self-regulation literature
• Self-regulation is “a regulatory process whereby an industry-level, as
opposed to a governmental- or firm-level, organization (such as a trade
association or professional society) sets and enforces rules and
standards relating to the conduct of firms in the industry” (Gupta and
Lad, 1983: 417)
• Positive: Industry organisations can ‘moralise’ industrial and
commercial life by creating a normative framework (Durkheim
1933). Industry members are committed (and not hostile) to
industry-imposed rules on behaviour (Boddewyn ,1985)
• Negative: Critics see self-regulation as being a way to keep
government from regulating, serving the industry rather than the
public and being an attempt to deceive the public that an industry is
behaving responsibly (Braithwaite, 1993 and Gunningham and Rees,
1997)
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Key themes emerging
• An industry morality is central
• A normative framework must be developed (by the
industry body)
• There must be practical ways to ensure compliance
• The system must be inclusive, reflective and honest
• Regulation and self-regulation are on a continuum; the
position on this should be determined by the industry
structure
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Evaluation: key issues and
performance indicators
Due process
• Inclusivity of
development
• Fairness of
implementation
• Fairness of
procedures for
monitoring
• Fairness of
procedures for
enforcement
• Suitability of
consequences
Relevance
• Whether it
addresses a
fundamental
problem
Success
• Extent to which
it achieves
objectives
• Existence of
organisation to
administer
• Nature of
monitoring
mechanisms
• Extent to which
sanctions are in
place and used
• Coverage
Alternative
approaches
• Adequacy of
sanctions
• Credibility
• Requirement
for external
input
• Adequacy of
resources
Source: Industry Canada 2002
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Evaluating the Lease Code
Due process
Relevance
• Inclusive
development
• Fragmented
implementation
arising from the
lack of single
industry body
• No procedures
for monitoring
or enforcement
• No direct
incentives or
negative
consequences
• Involvement of
range of parties
and
development
over three
editions
suggests
addresses
relevant
problems
Success
• Problems with
process make
this difficult to
establish
• Coverage is
poor
Alternative
approaches
• An independent
monitoring
body,
mandatory use
by professional
bodies or
legislation may
be considered
necessary
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Conclusions
• Despite the efforts of wide range of stakeholders, the Lease Code is
not measurably successful
• There is no clear sense of an industrial morality
• There is no normative framework to ensure that it works; the
structures are not in place to ensure implementation, monitor
compliance and record views of affected stakeholders
• One suggested reason for the apparent lack of the framework is the
fragmentation of ‘the industry’ and the lack of a single industry body
• The industry may not have the capacity to self-regulate , the
institutional structures may necessitate greater state intervention
• Further research is needed on self-regulation in property markets in
different countries alongside further study of the literature on other
industries with particular focus on institutional structures.
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