Legal Elements of a Commercial Lease in the UK

If you are looking for a property to conduct your business in England and Wales, you will need to sign a commercial lease once you have found the perfect place. It can be daunting for a business owner to enter into a lease for the first time and know what to request in lease negotiations. You do not want to find yourself locked into a lease for premises that turn out not to be suitable for your business. Or alternatively, to find out you are responsible for everything conceivable to do with the property. This article will explain the key things you need to know about commercial leases in England and Wales and what they contain. 

What is a Commercial Lease?

A commercial lease in England and Wales gives the tenant the right to use a particular property (or part of a property, for example, a particular unit in a shopping centre) for business or commercial reasons for a set amount of time. As with residential leases, there are different types of leases and different types of tenancies. The lease lays out details of your business’ rights and obligations as a tenant of the property, as well as the rights and responsibilities of your landlord.

What is Contained Within the Lease Document?

Your lease document would cover things like:

• what you can use the property for;
• how much rent you are paying and when;
• any service charge you need to pay;
• how long you are renting the property for; and 
• whether it is for that fixed-term or can be renewed (and if so, how it is renewed).  

Tenant’s Responsibilities

Your lease will also cover your rights and responsibilities as a tenant. For example, you may want to have the right to alter or decorate the property so it fits your needs and your business brand. In addition, you may need the right to cross the landlord’s property to access your property. 

Similarly, you will have specific responsibilities as a tenant. Your landlord will want to ensure you are responsible for:

• any damage you cause; 
• workplace health and safety considerations, such as fire and electrical safety for your electrical items; and
• depending on the type of property, the maintenance and repair of the property.

Landlord’s Responsibilities

The lease will also include the rights and responsibilities of your landlord. For example, a landlord might be responsible for: 

• maintenance and repairs of communal areas of a property; 
• fire safety; and
• the electrical safety of items belonging to them that are in your property.

Other Lease Inclusions

Your lease will also include essential clauses required by law. These clauses identify:

• the property;
• who the landlord is;
• your details; and 
• any other parties that might need to be included in the lease, such as a guarantor. 

These clauses also cover the length of the lease and any ‘premium’ being paid for the lease; this is not the rent amount you would be paying, but any lump sum that you agree to pay to the landlord for the lease. This is usually only relevant for long-term, large value leases.

Types of Leases

A ‘long form’ lease is usually used for more complex, higher-value lettings. For example, a long form lease may be for an entire business premises to provide a base for staff in a large business. 

A ‘short form’ lease is used for more straightforward lettings, such as a business unit for a small company or a small individual unit in a shopping centre or business park. The lease would usually be tailored to the type of property, whether it be a retail or industrial unit or an office space.

How Long Do Leases Last?

The length of your lease is something you would negotiate with your landlord. An important thing to consider is what happens at the end of a lease. If there is a fixed lease period or a fixed end date for the lease, you would need to consider what to do at the end of the lease. The landlord may agree you can stay if you want to, on a month-to-month tenancy with the same terms as the original lease you signed with them. You can negotiate a new lease with them, or, of course, they can require you to leave the premises.  

A ‘periodic’ tenancy is where the lease continues until either you or your landlord decide to end it. In this tenancy, your landlord can (provided they give you enough notice) increase the rent you pay or change other lease terms. Whilst you have more freedom to leave the property when you wish to (you must give notice in advance to your landlord that you want to leave), a periodic tenancy gives you less certainty than a fixed-term lease.

Key Takeaways

Before looking for business premises and entering into a lease, you must consider what you need to use a property for and how long you want it. You may want the security of knowing you can use the property for as long as you need or might want the freedom to move to bigger premises. Knowing this upfront allows you to understand what you need to negotiate with a potential landlord. The golden rule is that most terms in a commercial lease are negotiable, so you want to be sure what your must-haves are and what you are willing to negotiate.

If you need help with negotiating your business lease in England and Wales, 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. Call us today on 0808 196 8584 or visit our membership page.

Frequently Asked Questions