Commercial lease: what UK businesses must check before signing
A commercial lease is one of the most significant long-term financial commitments a UK business makes. Unlike a residential tenancy, commercial leases offer minimal statutory protection — the terms you agree to are largely the terms you are bound by. Getting them right before signing matters enormously.
Lease term and break clauses
Commercial leases in the UK typically run for three to ten years, though shorter terms are increasingly available. Before agreeing to a term length, consider whether your business will still need the space in five years, whether you might need to expand or contract, and what happens if the business does not grow as planned.
Break clauses — provisions allowing either party to end the lease early — are negotiable and valuable. A tenant break clause gives you an exit if the space stops working for your business. Check when the break can be exercised (typically at a fixed date or with a notice period), what conditions attach to it (breaks are often conditional on being up to date with rent and having complied with all lease obligations), and whether the break is personal to you or transferable.
Rent and rent review
Your lease should state the initial rent clearly, along with when and how it can be reviewed. Most commercial leases include rent review provisions — typically every three to five years — allowing the rent to be adjusted to the open market rate.
Upward-only rent review clauses mean your rent can only increase or stay the same at review — it cannot decrease even if market rents have fallen. These clauses are standard in the UK commercial property market but worth understanding before you agree to them.
Service charges
In multi-tenant buildings, tenants typically contribute to the cost of maintaining shared areas through a service charge. Service charges can be difficult to predict and can increase significantly year on year.
Check whether the lease caps the service charge, what it includes and excludes, and whether you have the right to see accounts and challenge charges you believe are unreasonable.
Repair and dilapidations
Commercial leases in the UK typically impose a full repairing obligation on the tenant — meaning you are responsible for keeping the premises in good repair throughout the lease and returning them in the same condition at the end.
Dilapidations — the cost of remedying any breach of the repair obligation at the end of the lease — can be a significant liability. Before signing, commission a schedule of condition documenting the state of the premises at the start of the lease. This limits your repairing obligation to maintaining the premises in no worse a condition than they were in when you took them.
Assignment and subletting
If you might want to transfer the lease to another business — whether because you are selling the business or exiting the space — check whether the lease allows assignment and subletting, and what conditions apply.
Most commercial leases allow assignment with the landlord's consent, which cannot be unreasonably withheld. But some leases include conditions that make assignment practically difficult, and some prohibit it entirely.
Personal guarantees
If your business is a limited company, a landlord may require the company directors to give personal guarantees — making them personally liable for the rent and other obligations if the company defaults.
Personal guarantees are significant liabilities that follow you personally even if the company fails. Consider whether the guarantee is capped, for how long it lasts, and whether you can negotiate it away or reduce its scope.
Getting your lease reviewed
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