Quick Answer
A commercial lease is a legal contract that lets a business occupy a property for a set term in return for rent. In the UK, leases are usually described in two ways. First, by who pays for repairs and running costs: a full repairing and insuring (FRI) lease puts almost everything on the tenant, an internal repairing lease covers only the inside, and multi-let buildings often add a service charge. Second, by security of tenure: a “protected” lease gives the tenant a legal right to renew under the Landlord and Tenant Act 1954, while a “contracted out” lease does not. Rent can be fixed, linked to inflation, reviewed to market rent or based on turnover. A ban on upward-only rent reviews in new leases has become law and is expected to take effect in 2027.
What Is a Commercial Lease?
A commercial lease is a legally binding contract between a landlord and a business tenant. It gives the tenant the right to occupy a property for business purposes, for a fixed term, in return for rent.
Beyond the basics of address, length and rent, a lease sets out who is responsible for what. Who fixes the roof? Who insures the building? Can the tenant leave early? How will the rent change over time? The answers vary hugely from one lease to the next.
That’s why there’s no such thing as a “standard” commercial lease. Two units side by side on the same estate can come with completely different costs and risks.
Think of it like a mobile phone contract. Two deals can have the same monthly price, but one includes the handset insurance and the other leaves you paying for every repair. You only find out which is better by reading the small print.
At Rory Mack Associates, we’ve been negotiating and managing commercial leases across Staffordshire, Cheshire and Shropshire since 1992. Here’s how the main types work in the UK.
Types of Lease by Who Pays for What
This is the question that makes the biggest difference to a tenant’s total costs.
| Lease type | Tenant pays for | Landlord pays for | Common in |
| Full repairing and insuring (FRI) | Rent, all repairs (inside and out), insurance, business rates | Very little | Single-let industrial units, shops and whole buildings |
| Effectively FRI, via service charge | Rent, internal repairs, a share of structural and common area costs through the service charge | Arranges the works, then recovers the cost | Multi-let offices, retail parks, industrial estates |
| Internal repairing | Rent, internal repairs and decoration | Roof, structure and exterior | Older buildings, suites in shared buildings |
| Inclusive (all-in) rent | One rent covering most costs, sometimes including utilities | Most running costs | Serviced and managed offices |
Full repairing and insuring (FRI) leases
The most common type of UK commercial lease, especially for a whole building. The tenant takes responsibility for all repairs, including the roof and structure, and pays for the building’s insurance, usually by reimbursing the landlord.
For landlords, an FRI lease means a clean, predictable income. For tenants, it means carrying the risk of big repair bills. That’s why a schedule of condition before signing is so important. Without one, you could be asked to return the building in better condition than you found it.
Leases with a service charge
In a building with several tenants, nobody can repair “their” bit of the roof. Instead, the landlord maintains the structure and shared areas, then recovers the cost from each tenant through a service charge. The overall effect is usually the same as an FRI lease, just shared out. Check what the service charge covers and whether there’s a cap.
Internal repairing leases
The tenant looks after the inside of their space, and the landlord keeps the structure and exterior in repair. These are fairer on tenants of older buildings, though the rent may be a little higher to reflect the landlord’s extra risk.
Inclusive leases
One all-in payment covers rent and most running costs. They’re simple to budget for, which is why serviced and flexible offices use them. You pay a premium for that convenience. Business rates may still be charged separately, so check.
Types of Lease by Security of Tenure
This decides what happens when the lease runs out.
Protected leases
Under the Landlord and Tenant Act 1954, most business tenants in occupation have a legal right to a new lease when the old one ends. The landlord can only refuse on specific grounds, such as wanting to redevelop the building or occupy it themselves, and may have to pay compensation. For a tenant with a business built around a location, that security is valuable.
Contracted out leases
Landlord and tenant can agree to exclude the 1954 Act protection. To do this, the landlord must serve a warning notice and the tenant must sign a declaration, before the lease is completed. At the end of the term, the tenant has no automatic right to stay.
Contracted out leases give landlords flexibility, and they’re common for shorter terms. Tenants should think carefully before agreeing, and may negotiate a lower rent or longer term in return.
The Law Commission is currently reviewing the 1954 Act. Its 2026 consultation proposes changes, including simplifying how leases are contracted out. Nothing has changed in law yet.
Licences and tenancies at will
For very short or informal arrangements, such as pop-up shops or occupation while a lease is being negotiated, a licence or tenancy at will may be used instead of a lease. They give the occupier very few rights and can be ended quickly.
Other Lease Terms You’ll Hear
- Break clause: lets one or both parties end the lease early on set dates. It’s often conditional, for example on the tenant having paid all rent and complied with repair obligations.
- Assignment and subletting: whether you can pass the lease to someone else, or let part of it out. Our guide to the difference between sub-letting and assigning a commercial lease explains both.
- Permitted use: what the property can be used for. It should match the planning use class, explained in our guide to types of commercial property.
How Rent Is Set and Reviewed
Most leases of more than a few years include a rent review, usually every three or five years. The lease says how the new rent is worked out.
- Open market review: the rent is reset to what a new tenant would pay for similar space at the review date. A surveyor compares local evidence, and if the two sides can’t agree, an independent expert or arbitrator decides.
- Fixed increases: the lease sets the increases in advance, for example a 3% rise each year or a stepped rent. Easy to budget for.
- Index-linked: the rent rises in line with inflation, usually CPI or RPI. Many leases add a collar and cap, such as no less than 1% and no more than 4% a year.
- Turnover rent: part or all of the rent is a percentage of the tenant’s sales, often with a fixed base rent underneath. These are mainly found in shopping centres and some leisure property, and suit both sides when trading is uncertain.
Our rent review and lease renewal team acts for landlords and tenants on reviews across the region.
The ban on upward-only rent reviews
For decades, most UK reviews have been “upward-only”: the rent can go up or stay the same, but never fall, even if the market drops.
That’s changing. The English Devolution and Community Empowerment Act 2026 bans upward-only rent review clauses in new commercial leases. The ban isn’t in force yet. It will start on a date set by regulations, expected during 2027. Once it does:
- It will apply to new leases and renewals granted after the start date, whether or not they’re contracted out of the 1954 Act.
- Some renewal arrangements agreed on or after 17 March 2026, such as options to renew, are also caught.
- Leases granted under an agreement signed before the start date will generally fall outside it.
For landlords, this means rent could fall at review in a weaker market, so expect more interest in fixed or index-linked increases. For tenants, it means fairer reviews, but check how any new lease is drafted. If you’re negotiating a lease or renewal now, take advice on how the timing affects you.
Gross, Net and Triple Net Leases: The UK Equivalents
You’ll often see terms like “triple net” online. They come from the US and aren’t used in UK leases, but they map roughly onto what we do here.
| US term | What it means | Nearest UK equivalent |
| Gross or full-service lease | Landlord pays the running costs; tenant pays one rent | Inclusive lease, such as a serviced office |
| Modified gross lease | Costs are split between landlord and tenant | Internal repairing lease, or a lease with a capped service charge |
| Single and double net leases | Tenant pays one or two of tax, insurance and maintenance | Rarely used in the UK, as tenants pay business rates anyway |
| Triple net (NNN) lease | Tenant pays rent plus tax, insurance and maintenance | Full repairing and insuring (FRI) lease |
| Absolute or bondable lease | Tenant takes on every cost and risk, including major structural failure | A tightly drafted FRI lease with no exceptions |
If someone describes a UK lease as “triple net”, they almost always mean FRI. Ask to see the actual repair, insurance and service charge clauses, because those decide what you’ll pay.
What to Check in Any Commercial Lease
Whatever type you’re offered, read these terms closely before you sign:
- Term and break dates: how long you’re committed for, and any conditions on breaking early
- Repair obligations: FRI, internal only, or limited by a schedule of condition
- Service charge: what it covers, how it’s split and whether it’s capped
- Rent review: how often, and how the new rent is set
- Security of tenure: protected or contracted out of the 1954 Act
- Permitted use: does it match your business and the planning use class?
- Alterations: what you can change, and what you’ll have to remove at the end
- Assignment and subletting: can you get out if your business changes?
- Dilapidations: what you’ll owe when you leave. See our guide to dilapidations.
For tenants, our guide to navigating lease agreements goes into more detail. Always have a solicitor review the lease before you commit.
A Real-World Example
Picture two businesses renting identical industrial units in Burslem, both at £15,000 a year.
The first takes an internal repairing lease, protected by the 1954 Act, with a schedule of condition. When the roof leaks in year four, the landlord fixes it. When the lease ends, they have the right to renew.
The second signs an FRI lease, contracted out, with no schedule of condition. The same roof leak costs them £12,000. At the end of the lease, the landlord decides to sell, and they have to move, plus pay a dilapidations claim for the roof that was already tired when they arrived.
Same rent on paper. Very different costs in practice. The lease type made all the difference.
How Rory Mack Associates Can Help
Our team works with landlords and tenants on every stage of a commercial lease:
- Advising on the right lease type and terms for your building or business
- Negotiating heads of terms for new lettings through our commercial estate agency
- Rent reviews and lease renewals
- Schedules of condition and dilapidations
- Day-to-day property management, including service charges
Our surveyors follow the RICS professional standard for leasing business premises, so negotiations are fair and transparent for both sides.
Summary
UK commercial leases are best understood in two ways: who pays for repairs and running costs, and whether the tenant has a right to renew. FRI leases put most costs on the tenant, internal repairing leases share them, and inclusive leases bundle them into one rent. Protected leases give tenants a right to renew under the 1954 Act, while contracted out leases don’t. Rent can be fixed, index-linked, reviewed to market or based on turnover, and the ban on upward-only reviews in new leases is expected to start in 2027. Whatever the type, the detail in the lease decides your real costs.
Letting a property or looking for premises? 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
The full repairing and insuring (FRI) lease. The tenant pays rent plus all repair and insurance costs, either directly or through a service charge in a multi-let building. It’s the standard for most single-let shops, offices and industrial units.
There’s no fixed length. Small units are often let for three to five years, while larger buildings and investment properties may be let for ten years or more. Break clauses are common, giving tenants some flexibility within longer terms.
It means the tenant gives up the statutory right to renew the lease when it ends. To contract out, the landlord must serve a warning notice and the tenant must sign a declaration before the lease is completed. Without that process, most business leases are protected.
Broadly, yes. “Triple net” is an American term for a lease where the tenant pays tax, insurance and maintenance on top of rent. The nearest UK equivalent is the full repairing and insuring lease, but always check the actual clauses rather than relying on the label.
The ban has become law under the English Devolution and Community Empowerment Act 2026, but it isn’t in force yet. It’s expected to start during 2027 and will apply to new commercial leases and renewals granted after that date. Existing upward-only clauses carry on as normal until then.
