Key Steps Involved in Entering a Commercial Lease in the UK

In Short

• A commercial lease gives your business exclusive use of a property for an agreed term, with rent and other costs set out in a legally binding agreement.

• Key steps include agreeing heads of terms, engaging solicitors for legal checks, negotiating the lease terms, and completing the lease once finalised.

• Tenants should review all obligations carefully, including rent, repairs, and service charges, before signing to avoid unexpected costs or restrictions.

Tips for Businesses

Before signing a commercial lease, seek legal advice early to understand your rights and obligations. Review key terms such as rent reviews, repair clauses, and subletting rights. Ensure your solicitor conducts thorough searches and confirms the landlord’s ownership before completion. Negotiating fair terms upfront can prevent costly disputes later.

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Table of Contents

• Commercial Lease
• Key Steps
• Key Takeaways
• Frequently Asked Questions

Entering into a commercial lease for your business use can be a significant commitment. Not only will you need to pay rent (and other fees), but you will also be entering into a legally binding agreement, which gives you some obligations towards your landlord. If you are looking for business premises for the first time and have no experience with commercial leases, you may be unsure where to start. This article outlines key steps for a business tenant entering a commercial lease in the UK.

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Commercial Lease

A commercial lease allows you to have exclusive occupation of a property as your commercial premises. You do so for an agreed timeframe (the lease term), and there may be restrictions on your use of the property. In return, you will pay your landlord rent. There may be other charges, such as insurance, rent, and service charges, which will be set out in your lease as well.

The commercial lease governs your occupation of the property, setting out your and the landlord’s rights and obligations. This can include your responsibilities for repairs, alterations, and any other activities within the property. 

Key Steps

Most commercial lease transactions will follow the usual key steps. Most commonly, this process takes around 4-6 weeks once the parties have reached an agreement on the heads of terms. We have detailed these key steps below. 

1. Agreeing Heads of Terms

Usually, tenants will find premises through agents, who represent the landlord’s commercial interests. At this stage, it may not be necessary for solicitors to get involved, as the parties reach an agreement on the commercial terms of the lease rather than the legal agreement. 

The landlord will often be responsible for drafting heads of terms, which set out key features of the lease. This usually includes the term and rent for the lease, as well as items like break clauses or rent reviews. This is not a legally binding document, but lists the principal commercial terms both parties intend for the commercial lease agreement. You must use this opportunity to negotiate terms that may benefit you, as a tenant, in your commercial lease. This facilitates negotiations down the line, as the parties can refer to the initial agreement. 

You may wish to consider factors that affect your budget, such as the rent amount, whether a portion of the insurance premium is payable, and any caps or estimates for service charges. Additionally, some terms affect your occupation of the premises, for example, the extent of your repair obligations, your ability to make modifications to the property or the right to sublet/licence. 

2. Engaging a Solicitor and Conducting Legal Checks

Once you and your commercial landlord have agreed on the heads of terms, this is the point at which you may involve a solicitor to help you enter the commercial lease. Solicitors for both parties will need to carry out legal checks for anti-money laundering, which will require you to provide identification.

The landlord’s solicitors will draft the necessary documents, which generally include the following:

• the lease;
• the rent deposit deed;
• (possibly) a licence for alterations; and
• sometimes, responses to pre-contract enquiries (CPSEs).

They may also share with your solicitor official copies from the Land Registry that prove the landlord does own the property and is therefore legally entitled to grant you a lease. Additionally, there may be commercial documents for you to review, such as building regulations. 

Your solicitor will review all those documents to check any risks that they should flag to you, and make any necessary amendments. 

You may find that your solicitor also carries out property searches on the commercial premises at this point. These cover any concerns or issues you may have and tend to include searches on the following:

• water and drainage;
• local authority; and 
• environment.

3. Undertaking Lease Negotiations

Once your solicitor has explained their review to you, including the key risks of each document, you may enter into a negotiation phase with the landlord. This can, for example, occur if you are unhappy with any of the provisions of your lease and wish to obtain more favourable terms. Usually, each party’s solicitor would communicate with the other directly to come to an agreement on any disputed terms. This process can involve several separate conversations between the parties and can vary widely in duration.

4. Completing the Lease

Once you are content with the negotiated lease, the parties will agree on a final version of the documents. Following this, you will be ready to ‘complete’ the lease. At this point, you must make your lease payment, including a rent deposit and the first rental payment. 

You will first sign your own counterpart of each document, and then the solicitors will agree to date the lease together. Your lease then comes into effect once it is dated. If your lease is registrable, your solicitor will then attend to its registration after you have paid any stamp duty land tax that is required for the lease.

Key Takeaways

Before you sign a commercial lease, several key steps typically occur. The first step is negotiating heads of terms. You will then instruct your solicitors, who will request specific documents from your commercial landlord’s solicitor, including the draft lease agreement. Following a series of negotiations between both parties, you can then sign your lease and make any necessary payment for your lease to start. 

For assistance reviewing your commercial lease agreement, our 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. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions