Quick Answer
Before signing a commercial lease agreement, a tenant should check these key terms: the length of the lease and any break clauses, the rent and how it will be reviewed, repair and insurance obligations, the service charge, permitted use, alterations, assignment and subletting, and whether the lease is protected by the Landlord and Tenant Act 1954. Most terms can be negotiated, including rent-free periods, break options and limits on repair liability. Get a survey and a schedule of condition before you commit, budget for legal fees, a rent deposit and any stamp duty, and always have a solicitor review the lease. A specialist commercial agent can negotiate the heads of terms on your behalf.
Why Your Lease Matters More Than the Rent
When businesses look for premises, they usually focus on two things: location and rent. The lease often gets skimmed.
That’s a mistake. The lease decides how much the property will really cost you, how long you’re tied in, what you can do with the space and what you’ll owe when you leave. A cheap rent on a bad lease can cost far more than a fair rent on a good one.
Think of the rent as the price on the menu. The lease is the bill at the end of the meal, including the service charge, the extras and the bit you didn’t read.
Whether you’re a start-up taking your first unit or an established firm moving to bigger premises, this guide walks through what to look for, what to negotiate and what it will all cost. If you’re still deciding which kind of lease suits you, start with our guide to the types of commercial lease in the UK.
The Key Clauses to Check in a Commercial Lease
1. The length of the lease
The term should match your business plans. A ten-year lease gives security, but it’s a long commitment if you might move, grow or buy your own premises. A three-year lease is flexible, but you may face a rent rise or have to move when it ends.
2. Break clauses
A break clause lets you end the lease early on set dates. Check:
- When you can use it, and how much notice you must give
- Whether it’s conditional, for example on paying all rent or complying with repair obligations
- Whether the landlord has a break right too
Conditional breaks are a common trap. If even a small condition isn’t met, the break can fail and you’re stuck with the lease. Ask for conditions to be limited to paying the rent.
3. Rent and rent reviews
Check the starting rent, when it’s paid (usually quarterly in advance), and how it will change. Reviews tend to happen every three to five years and may be to open market rent, fixed increases or linked to inflation. Fewer reviews means more certainty for you.
Most existing reviews are upward-only, meaning the rent can’t fall. A ban on upward-only reviews in new leases has become law and is expected to start in 2027, so the timing of your lease could matter.
4. Repairs and insurance
This is where hidden costs live. On a full repairing and insuring (FRI) lease, you’re responsible for all repairs, including the roof and structure, even if they were in poor condition when you moved in. Negotiate to limit your liability to the building’s condition at the start, backed by a schedule of condition.
Check too what the landlord’s insurance covers, who pays the premium and what happens if the building is damaged and can’t be used.
5. Service charge
In a multi-let building, you’ll pay a share of the costs of the structure and shared areas. Ask for the last few years’ service charge accounts, what’s included, how your share is calculated and whether there’s a cap. Watch for big one-off costs, such as a planned roof replacement, being passed on.
6. Permitted use
The lease will say what the property can be used for. Make sure it covers what you do now and what you might do in future. A narrow use clause can stop you changing direction, or make it hard to find someone to take the lease over. Check that it matches the planning use class too.
7. Alterations
Most leases restrict what you can change. Minor internal works may be allowed with consent, while structural changes are usually banned. Remember that anything you add, you may have to remove at the end. That feeds straight into a dilapidations claim.
8. Assignment and subletting
If your business moves, shrinks or is sold, can you pass the lease on? Check whether you can assign the whole lease or sublet part of it, and on what conditions.
For leases granted since 1 January 1996, a tenant is generally released from liability when they assign the lease. However, the landlord can usually require you to guarantee the new tenant’s obligations through an authorised guarantee agreement. That means you could still be on the hook if the new tenant fails. See our guide to sub-letting and assigning a commercial lease.
9. Security of tenure
Is the lease protected by the Landlord and Tenant Act 1954, or contracted out? A protected lease gives you a right to renew at the end. A contracted out lease doesn’t. If the location matters to your business, this is worth negotiating hard on.
How to Negotiate a Better Commercial Lease
Almost everything in a commercial lease can be negotiated. The best time to do it is at the heads of terms stage, before solicitors start drafting. Heads of terms are a short summary of the main deal points that both sides agree first.
Things tenants commonly negotiate:
- Rent-free periods: often given to cover fit-out time, or in return for a longer lease
- A lower starting rent, especially if the property has been empty for a while
- Break clauses, ideally with conditions limited to paying the rent
- Repair obligations limited to the condition shown in a schedule of condition
- A cap on the service charge
- Landlord-funded works before you move in, such as new flooring or lighting
- A wider permitted use and easier assignment terms
- Who pays the legal fees: each side usually pays its own, but this is negotiable
Your bargaining power depends on the market. In a quiet area with empty units, tenants can push hard. Where demand is strong, landlords have the upper hand. A local agent knows which is which. Our tips for tenants negotiating a commercial lease go into more detail.
Do Your Due Diligence
Before you sign, check the property and the deal properly:
- Inspect the building. For anything other than a simple internal repairing lease, get a survey. Our guide to why you need a commercial property survey explains the options.
- Agree a schedule of condition before you take occupation.
- Check the EPC. The landlord must provide an Energy Performance Certificate when letting the property. Commercial buildings generally need a rating of at least E to be let, and a poor rating could mean higher running costs or upgrade works later.
- Check planning. Make sure the use class allows your business.
- Check the business rates. Look up the rateable value on the government’s business rates service, as rates can be a large part of your costs.
- Check the market rent. Compare against similar properties nearby, so you know you’re paying a fair price.
Our commercial property due diligence checklist covers every step.
What Does It Cost to Take a Commercial Lease?
The rent is only part of the bill. Budget for:
| Cost | What to expect |
| Rent deposit | Often three to six months’ rent, held by the landlord, depending on your business’s financial strength |
| Legal fees | Your own solicitor’s fees, and sometimes the landlord’s too if agreed |
| Survey and schedule of condition | Depends on the size and age of the building |
| Stamp duty land tax | Payable on new leases where the rent over the term adds up to more than £150,000 in today’s money (1% above that, 2% above £5 million) |
| VAT | Charged on rent and service charge if the landlord has opted to tax the building |
| Business rates | Usually paid by the tenant direct to the council |
| Service charge and insurance | Your share of the building’s running costs |
| Fit-out | Setting the space up for your business |
Stamp duty on leases is calculated on the net present value of the rent, so ask your solicitor to work out the exact figure.
After You’ve Signed
The lease doesn’t go in a drawer once it’s signed. To avoid problems later:
- Diarise the key dates: rent reviews, break dates, the lease expiry and the deadlines for any notices. Missing a break date by a day can lock you in for years.
- Keep on top of repairs. Small, regular maintenance costs far less than a dilapidations bill at the end.
- Get consent before making changes. Unauthorised alterations can be expensive to undo.
- Keep records. Photos, invoices, consents and correspondence with the landlord are all valuable evidence later.
- Talk to your landlord. If your plans change, raise it early. Most landlords would rather negotiate than face an empty unit.
- Plan ahead for renewal. Start thinking about your next move 12 to 18 months before the lease ends. Our lease renewal guide for Stoke-on-Trent explains the process.
A Real-World Example
Picture a growing engineering firm taking a 7,000 square foot industrial unit in Stoke-on-Trent. The landlord offers a ten-year FRI lease at £35,000 a year, with no break clause.
With help from a commercial agent, the firm negotiates:
- A six-month rent-free period to cover fit-out
- A tenant-only break at year five, conditional only on rent being paid
- Repair liability limited to the condition recorded in a schedule of condition, which shows the roof already needs work
- Permission to put up a mezzanine, with the option to leave it in place at the end
On paper, the rent is the same. In reality, the firm saves £17,500 in year one, gains the flexibility to move if it outgrows the unit, and avoids a likely five-figure roof bill when it leaves.
How Rory Mack Associates Can Help
Taking on commercial premises is a big decision, and you don’t have to do it alone. Our team can:
- Find suitable premises across Staffordshire, Cheshire and Shropshire through our commercial estate agency
- Negotiate heads of terms on your behalf
- Check that the rent is in line with the local market
- Prepare schedules of condition before you move in
- Advise on rent reviews and lease renewals
- Challenge your business rates if the rateable value looks too high
Browse our available commercial properties to see what’s on the market now.
Summary
A commercial lease agreement decides far more than your rent. Before you sign, check the length and break clauses, rent reviews, repair and insurance obligations, service charge, permitted use, alterations, assignment rights and whether the lease is protected by the 1954 Act. Negotiate at the heads of terms stage, get a survey and schedule of condition, and budget for the deposit, legal fees, stamp duty and running costs. Once signed, diarise every key date. With the right advice, a lease can support your business for years instead of holding it back.
Looking for premises, or about to sign a lease? Speak to our team on 01782 715725.
This guide is general information and not legal advice. Always have a solicitor review a lease before you sign.
Frequently Asked Questions
Yes. Almost every term is negotiable, including the rent, rent-free periods, the length of the lease, break clauses, repair obligations and the service charge. The best time to negotiate is at the heads of terms stage, before solicitors start drafting.
It depends on the lease. On a full repairing and insuring lease, the tenant pays for all repairs, inside and out. On an internal repairing lease, the tenant only covers the inside. A schedule of condition can limit a tenant’s liability to the building’s condition at the start of the lease.
There’s no fixed amount. Landlords often ask for three to six months’ rent as a rent deposit, depending on the financial strength of the business. Start-ups and new companies may be asked for more, or for a personal guarantee.
Only if the lease allows it, for example through a break clause, or by assigning the lease or subletting with the landlord’s consent. You can also try to agree a surrender with your landlord. Check break conditions carefully, as failing one can stop the break working.
Possibly. Stamp duty land tax is payable on a new lease when the net present value of the rent over the term exceeds £150,000. The rate is 1% on the value above that, rising to 2% above £5 million. Your solicitor will calculate the exact amount.
