What are Usage Terms in a UK Commercial Lease?

Commercial lease agreements include various terms surrounding the rights and obligations of commercial landlords and tenants. Whether you are a landlord or a tenant in a commercial lease, you should understand each term to ensure that you comply with them. An essential term in a commercial lease is the usage terms for the commercial property. If you breach your lease obligations, you are likely in breach of your commercial lease, which can have repercussions. For example, you may face court, which can incur costs and can potentially damage the commercial landlord’s reputation. This article will explain usage terms in a commercial lease.

Commercial Lease  

A commercial lease is where a commercial landlord (the lessor) leases their property or part of it to a commercial tenant (the lessee). The lessee enjoys the sole occupation of the property which they use for business as their commercial premises. A commercial lease will last a specific duration, the lease term, and a tenant will pay the landlord rent in return for the use of the space. 

A commercial lease agreement is a legally binding contract detailing the terms and obligations of the commercial lease. It includes various rights and responsibilities for both parties, such as:

• repair and maintenance obligations;
• health and safety obligations;
• termination rights;
• rent review rights; and 
• details about rights to assign and sublet. 

Usage Terms  

The parties to a commercial lease will normally intend the tenant to use the premises for a business purpose. The lease agreement will usually include specific usage terms for the commercial lease. These detail the permitted use of the property, which is what the commercial tenant must use it for. 

Depending on the commercial lease, the use of the property may be broad or specific. For example, a commercial lease may detail that the property is for use as a retail space, yet another commercial lease may detail that a property is for use as a clothes shop. It is often to the advantage of both the landlord and tenant if the permitted use is broad rather than specific. This means that more people are likely to lease the premises and provides flexibility for the tenant to assign or sublet the property as a wide range of businesses may be able to make use of it. 

Class of Use

The permitted use of commercial premises can also be by class of use or use class. For example, Class E for commercial, business and service use and Class C for hotels.

Both landlords and tenants must note that permission to use a business premises for a specific business use does not condone that use as a lawful one. It is for the tenant to satisfy that the use of a commercial premises is lawful, including that the property can be used for their business use at a planning law level. Often, the lease will include that the landlord does not give any warranty or guarantee that a tenant can use the property in the way stated in the lease to release themselves from liability. Likewise, the tenant will often be liable to ensure this is the case and responsible for costs and liability the landlord faces if there is a breach of planning requirements. 

Change of Use

It may be possible to change the permitted use of the property. The commercial lease agreement will detail if this is possible or not. Where it is, the commercial tenant will likely need to obtain the permission of the commercial landlord. However, whilst the commercial lease will state permitted use of the premises, there may also be permitted use in terms of planning laws. These usage terms are the ‘planning use class’. Therefore, changing the use of a commercial premises can sometimes require you to gain planning permission from a local authority planning department. However, you often cannot apply for this without first gaining the landlord’s consent to apply.

Key Takeaways

Commercial lease agreements detail many terms and obligations, including the commercial premises’ usage terms. A commercial lease is for business use, but the lease agreement can be more specific than this regarding the permitted use. A commercial tenant can only use the business premises for the permitted use in the lease agreement. The use of a property may be broad such as a retail space, or more specific, by stating what type of retail space, such as a clothes shop. Leases may state a specific class use for the premises, such as Class E. 

In addition, there can also be terms related to permitted planning use. Changing the use of a commercial lease may be possible, but this will normally require the landlord’s permission. Regardless of the usage terms, you must satisfy yourself that the use of the property is lawful.  

If you need help understanding usage terms in a commercial lease in the UK, 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.

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