Which one is correct?
code-length less than # lines
less than # lines code-length
Also, Should I write 'code-length' (with hyphen) or as separate words 'code length'?
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Code-length is not a familiar hyphenated term. People will understand it, but they will wonder why you said it that way when it is not usual.
It would be more normal to say any of the following, if you're using full sentences:
The length of code should be less than # lines
There should be fewer than # lines of code.
If you're using fragments, such as in a summary list of specifications, I would use something like:
Fewer than # lines of code
Code to comprise fewer than # lines