Before You Put Pen to Paper: Seven Commercial Lease Provisions That Deserve a Second Look
Photo: Gage Skidmore from Surprise, AZ, United States of America, CC BY-SA 2.0, via Wikimedia Commons
For many small and medium-sized enterprises, premises are the second-largest outgoing after payroll. Yet time and again, business owners sign leases drafted almost entirely in the landlord's favour, only to discover the true cost of those terms years later. A commercial lease is not a formality — it is a long-term financial instrument, and every clause within it is, in principle, negotiable.
Why the Draft Is Never Neutral
The first draft of a lease is a negotiating position, not a settled agreement. Landlords and their agents expect comment; a tenant who returns the document unmarked has simply surrendered leverage they did not know they held. Below are seven provisions that warrant particular attention before any signature is applied.
1. Break Clauses and Their Conditions
A break clause offers flexibility, but the conditions attached to it frequently undermine its value. Landlords often require the tenant to have paid all rent and observed every covenant — a standard that is easy to trip over. A single late payment of rent has, in reported cases, defeated a break notice. Negotiate for a limited, clearly defined set of conditions, and ensure the notice period and service requirements are workable in practice.
2. Full Repairing Obligations
An 'full repairing and insuring' (FRI) lease transfers the entire cost of maintaining the building to the tenant. Where the premises are older or already worn, this can be punishing. The remedy is a schedule of condition annexed to the lease, photographically recording the state of the property at commencement, so your obligation is limited to keeping it in no worse a state.
3. Rent Review Mechanics
Upward-only rent reviews remain common in England and Wales. The review formula — open market rent, index-linking, or a fixed percentage — determines your outgoings for years to come. Understand precisely how the review operates, who appoints the surveyor, and whether there is any mechanism for arbitration or independent determination in the event of disagreement.
4. Service Charge Transparency
Where a lease sits within a multi-occupied building or estate, service charges can escalate unpredictably. Insist on a cap (or at least a schedule of excluded items), an obligation on the landlord to provide itemised accounts annually, and a right to challenge unreasonable expenditure.
5. Alienation and Assignment
The covenant governing assignment and underletting controls whether you can sell your business with the lease attached or sublet surplus space. Overly restrictive provisions can materially reduce the value of your business on exit. Reasonable landlords will permit assignment with consent, not to be unreasonably withheld — the statutory baseline under the Landlord and Tenant Act 1927.
6. Alterations and Use
Restrictions on alterations can stifle growth; restrictive user clauses can render the premises unusable if your business model evolves. Seek consent wording that is reasonable, and secure the widest user clause you sensibly can — a narrow permitted use is difficult to widen later without paying for it.
7. Security of Tenure and Its Exclusion
Many leases are granted outside the security of tenure provisions of the Landlord and Tenant Act 1954, meaning you have no automatic right to remain when the term expires. That may be acceptable — but it should be a conscious decision, not a clause noticed for the first time at renewal.
When to Involve a Solicitor
The practical answer is: before heads of terms are agreed, not after. Once the principal commercial points are settled, there is little room to revisit them. At Bentley Law, we advise business owners across the UK on lease negotiation, from reviewing heads of terms to negotiating the final engrossment. A modest investment in legal review at the outset routinely saves multiples of that sum in avoided disputes, dilapidations claims, and rent review exposure.
If you are considering premises — whether a first workshop or a flagship retail unit — speak to our commercial property team before you commit. The best time to negotiate is always before you sign.
