For many businesses, securing premises is one of the most important steps in launching or expanding operations. Whether it’s an office, shopfront or industrial unit, arrangements are typically governed by a commercial lease.
If you’re entering into a commercial lease for the first time – or considering renewing or ending one – it’s crucial to understand how these legal agreements work and what responsibilities they create. This guide outlines the fundamentals of commercial leases in the UK, along with key legal considerations for tenants and landlords alike.
Defining a commercial lease
A commercial lease is a legally binding agreement between a landlord (the freeholder or long-term leaseholder of a property) and a tenant (typically a business) that grants the tenant the right to use the premises for business purposes for a specified period, in exchange for rent.
Unlike residential tenancy agreements, commercial leases are highly customisable. The terms can vary significantly depending on the property, the nature of the business and what the parties negotiate. Because of this flexibility, commercial leases require careful scrutiny – and ideally, professional legal advice – before signing.
Key features of a commercial lease
Most commercial leases will include essential clauses covering:
- Term: The length of the lease and any options to renew.
- Rent: How much is payable, how often and whether there are rent reviews.
- Use: Restrictions on how the tenant may use the property.
- Repair and maintenance: Who is responsible for upkeep and repairs.
- Assignment and subletting: Whether the tenant can transfer the lease or sublet the premises.
- Termination clauses: Including break clauses that allow early termination under agreed conditions.
These terms define the rights and responsibilities of both parties and can significantly impact the tenant’s flexibility and financial exposure during the lease term.
Why legal advice is essential for commercial leases
A commercial lease is a legally binding contract that can have significant long-term implications for your business. Unlike standard residential tenancies, commercial leases are complex and often heavily weighted in the landlord’s favour. Without proper legal guidance, it’s easy to overlook clauses that may expose you to unnecessary risks or costs.
That’s why it’s important to seek support from a solicitor who specialises in commercial property law. They can review the lease in detail, highlight any terms that may be overly restrictive or unfair and ensure your responsibilities are clearly understood. Where necessary, they can also negotiate with the landlord’s solicitor to agree more balanced terms that better protect your interests.
Responsibilities of commercial tenants
Tenants under a commercial lease take on more responsibilities than they might under a residential agreement. These responsibilities are contractual and typically non-negotiable after the lease is signed. Common obligations include keeping the premises in repair, paying business rates and utilities, complying with permitted use restrictions and maintaining public liability insurance.
It’s also common for tenants to be responsible for internal decoration and maintenance and sometimes the structure or exterior if the lease is a full repairing and insuring (FRI) lease. Tenants must understand these obligations upfront to avoid surprise costs or breach of contract issues later down the line.
Rent reviews and service charges
Rent in a commercial lease is not always fixed. Many leases include rent review clauses, which can be based on market rent, a fixed uplift or inflation. Reviews are typically conducted every three to five years and can lead to an increase in rent.
In multi-occupancy buildings like shopping centres or office blocks, landlords often charge service fees to cover shared costs such as cleaning, maintenance and security. These fees can fluctuate and are often subject to annual review. Tenants should check how service charges are calculated and whether a cap applies.
Ending a commercial lease
There are several ways a commercial lease might end:
- At the end of the fixed term: The lease naturally expires unless renewed.
- Break clauses: If included, either party may end the lease early under specific conditions.
- Forfeiture: The landlord may reclaim possession if the tenant breaches key lease terms (e.g. non-payment of rent).
- Assignment or subletting: The tenant may transfer the lease to a new occupier, subject to the lease allowing it and the landlord’s consent.
Navigating lease termination or renewal requires careful attention, particularly where statutory rights under the Landlord and Tenant Act 1954 apply. These rights can entitle tenants to renew their lease unless the landlord has a valid reason to oppose it.
How Osbourne Pinner can help
Entering into a commercial lease is a significant legal and financial commitment. Whether you’re a landlord seeking to protect your asset or a tenant securing premises for your business, the terms of your lease must be right from the outset.
At Osbourne Pinner Solicitors, our commercial property team offers clear, practical legal advice to help you understand your lease, protect your position and avoid costly disputes down the line. From lease reviews and negotiations to assignments, renewals and exit strategies, we guide landlords and tenants through every stage of the commercial leasing process.
We offer a free 30-minute consultation to discuss your needs. Contact us via the form below, call 0203 983 508 or email [email protected] to speak with one of our commercial property specialists.
You can come to our offices in Harrow, Canary Wharf, Piccadilly Circus or Manchester – or speak to us on a video call if you’d prefer a remote consultation.
