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Whether you are a landlord or a tenant, you must adhere to the terms of your commercial lease agreement. Property law and other areas of law, such as law about planning for property and land, will affect how commercial leases work and what a lease agreement may contain. Notably, the law can change, so you must keep up with legal changes to ensure your commercial lease remains compliant. One change has been in use classes order for commercial leases in the UK. Use classes determine the different uses and development rights of a commercial property. This article will explain use classes and how they impact your commercial lease.
What is a Commercial Lease?
A commercial lease is where a business owner occupies a property as their business premises. A commercial landlord will permit the tenant to use their premises for a specific business activity in return for rent.
Additionally, a commercial lease agreement will govern the lease. It will detail the terms of the lease, which are the rights and obligations of the parties to the lease. One of these is the permitted usage of the commercial premises, which can include the use class.
What are Use Classes?
UK law categorises buildings and land into specific uses, known as use classes. Use classes determine how you can plan and develop land and property in the UK and cover all types of buildings. A change of use of a property does not need planning permission if it is a change within the same use class.
Commercial landlords must be aware that the use class of their property can restrict who leases it. It is equally essential that a commercial tenant checks the use class of a property before they lease it to ensure the property is appropriate for their type of business operation.
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The Law Surrounding Use Classes
At the end of 2020, UK law surrounding use classes saw some changes. These were put in place to reflect how the retail sector in the UK was changing and to help combat a poor time for business in the industry.
Class E
This move saw many properties in the A1, A2, A3, B1 and D2 use class move to a new class use: class E.
These changes mean that there is the potential for commercial properties to have a mixed-use setup. Therefore, if you are a commercial landlord or tenant, your commercial property use can be more flexible. As a commercial landlord, you can state that your commercial premises fall under Class E, meaning you can attract a wider range of potential tenants. If you are a commercial tenant who runs a shop, for example, you can use a property with a Class E use, and it will be much less expensive than a shop on a busy city high street.
Class F1 and Class F2
As part of the class use changes, existing classes A and D are no longer in use, and two new categories, class F1 and Class F2, have been created.
Class F1 includes, for example, museums and art galleries. Class F2 includes local community uses, such as:
- sports facilities;
- skating rinks;
- swimming pools;
- community halls; and
- small shops which are far from other shops and mainly sell food.
This cheat sheet outlines what you should be aware of in your lease agreement.
Key Takeaways
Commercial lease agreements contain the terms of a lease, including permitted activities that can take place on the property. This is known as the business use term and can include a specific use class. Use classes determine the correct legal use of the property. As of the end of 2020, the retail sector saw changes to use classes. The significant result of this was a new broader class, E Class, allowing more flexibility over certain properties for landlords and tenants.
LegalVision cannot provide legal assistance related to class use and planning law. However, for general commercial leasing matters, 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
A commercial lease is where a business owner occupies property for their business activity in return for rent.
Class use is the legal category that determines what type of activity can take place in a property or land, such as a shop or an office.
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