What is the Difference Between Fixed and Periodic Terms in Commercial Lease Agreements?

As a commercial landlord or tenant, knowing when the lease agreement comes to an end provides great certainty. Most commercial lease agreements will detail the term of the lease, which is the period the business tenant occupies the commercial premises. Nevertheless, the type of lease term can vary between commercial leases, so a business tenant and landlord must know the lease terms available to them. This article will explain the difference between fixed and periodic terms in a commercial lease agreement when renting a commercial property for a business. 

What Are Fixed End Dates?

A fixed end date refers to the exact date the lease terminates. When the lease reaches the fixed end date, a tenant may have the option to remain on the commercial premises. As such, the lease agreement might specify the:

• tenancy continues with the same rules; or
• parties to the lease agree to a new lease.

Additionally, there are some advantages for a tenant with a fixed end date in a commercial lease. These are that:

• the landlord is not able to increase the rent during the lease;
• the lease does not require notice to terminate the lease agreement; and
• a landlord cannot amend the lease terms unless they express they can in the lease agreement and the tenant agrees to the change 

However, a landlord may not accept either of the above. If the tenant does not leave the premises, the landlord may start eviction proceedings.

What Are Fixed Number of Weeks, Months or Years Terms?

A lease term can also define a number of weeks, months and years. In this instance, the lease term will have an exact start date but no specific end date. Instead, it will end when the stated period ends. This type of lease does not:

• require either party to provide notice to terminate; and
• allow the landlord to increase the rent unless they specifically say that they can in the lease agreement, and the tenant agrees.

When this type of fixed-term lease ends, the parties to the lease may decide to sign a new lease. Alternatively, if the tenant continues to occupy the premises and pay rent, the landlord may choose to accept the same lease conditions with the same terms and rules. 

However, if the landlord does not want the tenant to remain in occupation, they will likely begin eviction proceedings to regain possession.  

What Are Periodic Terms?

A periodic lease term is quite different from the two fixed lease terms above. A periodic lease may be:

• weekly;
• monthly; or 
• yearly.

Additionally, a periodic lease term will automatically renew at the end of whichever of the above periods it specifies applies to the lease. If either party to the lease wishes a periodic tenancy to terminate, they must give notice. Notably, the notice must be in the format the law prescribes. Consequently, a tenant must vacate the commercial premises once the tenancy ends after the notice that either party gave. 

As long as the landlord provides the correct statutory notices, they are usually able to:

• increase the rent; and
• amend the lease terms of a periodic lease. 

Cheat Sheet for Leasing Terms

This cheat sheet outlines what you should be aware of in your lease agreement.

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Key Takeaways

If you are party to a commercial lease, you must agree to the lease term. A lease term is the time which the lease will last. There are various types of lease terms that a commercial landlord and tenant may agree to, such as:

• fixed term lease, which ends on a select date or after a certain time period lapses; or 
• periodic tenancy, which renews automatically at the end of the above period it specifies.

If you need help understanding what lease terms are used when renting commercial property in the UK, LegalVision’s experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents for a low monthly fee. So call us today on 0808 196 8584 or visit our membership page.