Blog written by Asad Khan.

As a business owner, you might be considering a commercial lease to secure premises for your company. Whether you’re renting office space, a retail unit, restaurant, or an industrial property, the terms you agree to may significantly impact your operational flexibility, long-term security, and financial obligations.

Unlike residential tenancies, commercial leases are complex and can demand a lot of negotiating depending on the goals of your business. These terms define the rights and responsibilities of both commercial landlords and tenants. Understanding what these terms mean is critical, as leaving to assumption may face you with unexpected costs or restrictions. Something that will likely hinder your strategy and business growth.

With years of experience negotiating terms and drafting commercial lease agreements, I want to share my expertise by breaking down the key terms you should understand before signing a lease. Familiarise yourself with these clauses – you’ll be better equipped to negotiate a lease that works in your favour and protect your business interests.

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When entering a commercial lease, the length of the agreement and your ability to exit it early are critical considerations. These factors affect your business’s flexibility, financial commitments, and long-term security.

Lease Term

The lease term refers to the length of time you are legally bound to occupy and pay rent for the premises. Commercial leases can vary significantly, from short-term agreements of just a few years to long-term leases spanning decades. A longer lease may provide stability but can also limit flexibility if your business needs change. It’s essential to consider your future growth, market conditions, and potential business risks before committing to a term length.

Tenancy at Will

A tenancy at will offers the ultimate flexibility but also the least security. This type of agreement allows both the landlord and tenant to terminate the lease at any time, usually without prior notice. It is often used in temporary arrangements, such as when a tenant needs immediate access to a property while formal lease terms are being negotiated. However, because there is no guaranteed tenure, it may transpire to be a costly set up if you’re already operating in the property and an agreement cannot be reached.

Break Clauses

A break clause is a provision in the lease that allows either the landlord, tenant, or both parties to end the lease early, subject to certain conditions. These clauses are valuable for tenants who want the option to exit if their circumstances change.

Key considerations for break clauses include:

I recommend negotiating fair and reasonable terms around break clauses if you’re looking for flexibility and better protection with your commercial lease.

Forfeiture is the landlord’s right to terminate the lease early if the tenant breaches key terms, most commonly for:

The lease will set out how and when the landlord can enforce forfeiture, including any notice period or opportunity to remedy the breach. If you’re a tenant, this clause is not just technical legal jargon – it could determine whether your business stays open or not. Get advice if you’re not sure what actions could trigger forfeiture.

One of the most important protections available for tenants in UK law is the security of tenure provided by the Landlord and Tenant Act 1954. This gives commercial tenants the automative right to renew their lease at the end of the term, unless the landlord has valid grounds for refusal under the same Act.

However, security of tenure terms is rare in contemporary UK lease agreements. Many commercial landlords want greater control of the property and its future usage. It is therefore possible that a landlord will request prospective tenants to waive this protection through what is called “contract out” before the lease is signed. Should you agree, you have no automatic right to remain in the premises after the lease ends, nor to request a new one.

That needn’t mean it is not possible to renew the lease, it just gives the landlord the choice. So, if you’re looking to establish a long-term business in a particular location, ensure that your lease term is at least lengthy enough.

Always ask your commercial property lawyer to review terms like these and negotiate the best terms possible. It’s not something to gloss over. It can shape the entire future of your business premises.

The demise is the legal term that refers to the specific part of the property you’re entitled to occupy under the lease. Typically, this is:

A bit of advice: ensure you clarify the boundaries because this will determine your repairing obligations, access rights, and what’s included in your rent. Always check the lease plan carefully to confirm what areas you’re responsible for such as shared corridors, external walls, or roof spaces.

How much you pay for your commercial property is a key consideration for any tenant. Negotiating a fair price from the outset will help secure long-term affordability, especially in today’s volatile market conditions. So, I recommend sourcing at least one third-party valuation before making any commitments.

Rent: Understanding Your Financial Commitment

The rent you agree to in a commercial lease is one of the most significant costs of occupying the premises. Unlike residential leases, commercial rent is typically subject to VAT (if the landlord has opted to charge it), and payment are usually made quarterly in advance. Before signing a commercial lease, tenants should consider:

Rent Reviews: How and When Your Rent May Increase

Most commercial leases include rent review clauses, which set provisions on when and how the rent can be adjusted during the term. It will typically only change with an increase, which is why negotiating a fair rent from the outset is ideal. Common rent review mechanisms include:

For tenants, negotiating fair terms around rent reviews is significant for long-term affordability so again, I recommend seeking a professional valuation before entering terms.

Service Charges: Understanding Additional Costs

If the commercial property is part of a multi-occupied building or estate, tenants are often required to contribute towards shared costs through a service charge. Typically, these cover:

But service charges can be unpredictable, so tenants should review:

These are all important aspects to be aware of when entering a commercial lease, so ensure you’re abreast of it and understand the details.

One of the most important, and often overlooked, elements of a commercial lease is understanding who is responsible for the upkeep of the property. Make sure to clarify these obligations to avoid costly disputes or unexpected liabilities at the end of your lease term.

Full Repairing & Insuring (FRI) Leases

Most commercial leases are let on a full repairing and insuring (FRI) basis. This means the tenant is responsible for maintaining the property (or the part of they occupy) in good condition throughout the lease term, as well as contributing to the cost of the building insurance.

Even if the property is in a poor condition at the beginning of the lease, the tenant could still be liable to put it into a better condition upon exit. Unless the lease says otherwise.

Key terms tenants should look out for:

When it comes to the obligations of repair and maintenance of a commercial property, the onus should never be left to assumption. Additionally, it’s worth seeking legal advice before signing your commercial lease to ensure your responsibilities are proportionate to the use of the property.

Taking on a commercial property involves more than the space and term of use – it’s also how you’re allowed to use it. You might have big plans for your business, but if the lease says you can only use the premises for one specific use, or puts restrictions in place you didn’t expect, those plans could be limited before you’ve even opened the doors. Understanding these terms ensures the commercial property works for your business now and as it grows:

Permitted Use

The lease will specify a “permitted use” that sets a clear definition of the type of business activity allowed on the premises. These can be broad i.e., “any lawful business use” or highly specific i.e., “for use of takeaway food outlet only”.

If your business plans to evolve or diversify in the future, for example, you wanted to bring a seating area inside your food outlet to serve food inside, you’ll need to negotiate a wider permitted use clause. Otherwise, you may find yourself in breach of your lease simply by expanding your services or changing your business model.

Planning Permission and Use Classes

While the lease may permit a particular use, you’ll also need to ensure the property has the appropriate planning under the local authority’s use class system. For example, operating a café (Class E) in a unit that only has permission for office use (also Class E, but sometimes with limitations) might still require additional consent.

Your commercial property solicitor should review this and advise whether the current planning status aligns with your intended use, or whether plannings permissions needs to be applied for.

Exclusive vs Non-Exclusive Use

Some leases grant exclusive use, which means no other tenants in the building or complex can operate a similar type of business. Others allow non-exclusive use, which may lead to direct competition within the same development. These terms are particularly relevant for retail or food businesses and should be clarified upfront.

Restrictions & Prohibited Uses

Commercial leases often include a list of prohibited activities to maintain the building’s reputation, safety, or value. These may include bans on:

These terms aren’t always the end of the road for prospective tenants. Often some restrictions can be negotiated depending on the landlord’s priorities and the nature of your business.

In the context of commercial leases and property law, alienation refers to your ability as a tenant to dispose of your lease, either in whole or in part, during the term. This one’s a key area to consider, especially if your business circumstances change and you no longer need the premises or need to adapt how you use it.

Your commercial lease may set out the specific type of disposal you’re allowed to make, and the conditions that apply. Here’s what you could negotiate:

Lease assignment

This is where you transfer the remainder of your lease to another tenant. Basically, you’re stepping out and someone else is stepping in. They take on your rights and obligations under the lease. Most leases allow this, but only with the landlord’s prior written consent. The landlord will likely impose conditions such as:

Underlet (Sublet)

If you’re thinking about renting out part of the property to another business or you’re likely to in the future, this clause is ideal to understand and secure. Most commercial leases will require the landlord’s written consent and may impose conditions or restrictions, such as only underletting to a tenant of similar quality or ensuring the rent is in line with market value.

Charging the lease

Some leases permit you to charge the lease. Essentially, it means you’re using it as a security for a loan. This is more relevant in high-value commercial settings and, again, will usually require landlord consent.

Key terms tenants should look out for:

Alienation provisions give you flexibility, but they often come with strings attached. If you’re unsure, this is one area where it really pays off to get legal advice before you commit.

Much alike leasing a residential property, landlords will often ask for financial security to protect against the risk of non-payment or damage. This is typically done through a rent deposit, a personal guarantee, or both.

Rent Deposits

A rent deposit is a lump sum paid by the tenant at the start of the lease usually equivalent to 3-6 months’ rent. This money is held by the landlord and can be drawn upon if the tenant fails to meet their obligations under the lease, such as paying rent or repairing damage.

The commercial lease should set out:

Personal or Company Guarantees

Landlords may also request a guarantor, often a director or parent company, especially when leasing to a new business or one with limited trading history. A personal guarantee means that if the tenant cannot meet its lease obligations, the guarantor becomes personally liable.

It’s a serious commitment and one that should never be entered into lightly. Guarantors are often jointly and severally liable, which means the landlord can pursue the full amount from either the tenant or the guarantor.

These financial safeguards are common, but the terms can vary significantly. As a business owner, understanding the risks involved, especially if you’re providing a personal guarantee, is highly important. Don’t assume it’s boilerplate. Always check the details, and make sure your commercial lease solicitor walks you through exactly what you’re committing to.

We are proud to offer expert commercial property legal services in Bournemouth, led by a team with deep expertise in commercial leases, acquisitions, and landlord and tenant matters. Whether you’re a business tenant negotiating lease terms, a landlord drafting agreements, or an investor acquiring premises, our solicitors deliver strategic, practical advice to protect your interests at every stage.

Our commercial property team understands the complex and often high-stakes nature of commercial leases. With years of experience advising on lease negotiations, break clauses, rent reviews, repair obligations, and more, we ensure our clients enter agreements with clarity and confidence.

Our Bournemouth office is ideally situated to support businesses and property owners across the region:

Leonard Solicitors LLP
Victoria Chambers, 27 Fir Vale Road,
Bournemouth,
BN1 2JN

Tel: 01202149432

Contact us today to arrange a consultation with one of our specialist commercial property solicitors. We’ll help you navigate your legal obligations and secure terms that work for your business or investment goals.

Looking for clear, commercially focused legal advice on your property matters in Southampton? Our commercial property solicitors are here to help. With a strong track record supporting landlords, tenants, developers, and business owners, we provide the legal clarity and strategic insight you need to move forward with confidence.

Whether you’re negotiating a lease, acquiring new premises, or managing a complex portfolio, we’ll guide you through the legal landscape with a focus on practical outcomes. We regularly advise on matters such as rent reviews, break clauses, repair obligations, and lease renewals — always with your business goals in mind.

You’ll find us in central Southampton:

Leonard Solicitors LLP
62 The Avenue
Southampton,
SO17 1XS

Tel: 023 8023 4433

Get in touch to arrange a consultation with one of our commercial property experts. We’re here to protect your interests and make your next move a smooth one.