A commercial lease is a major, long-term commitment, often the biggest fixed cost a business has. Unlike a home tenancy, commercial leases are heavily negotiable and full of technical terms that can cost you dearly if misunderstood. Here is a plain-English checklist for businesses in England and Wales before you sign.
1. The basics: term, rent and what you're getting
- Term (length), how many years, and is there flexibility?
- Rent, the amount, how often it is paid, and whether VAT is added.
- The premises, exactly what is included (and any shared/common parts and rights of access).
2. Security of tenure (the 1954 Act), crucial
Most business tenancies are protected by Part II of the Landlord and Tenant Act 1954, giving you the right to renew at the end of the term. But landlords often ask tenants to "contract out" of this protection, which can only be done if a strict procedure (a landlord's warning notice and your declaration) is followed before you commit. Know whether your lease is "inside" or "outside" the Act, because it affects your long-term security.
3. Rent review
Longer leases usually contain a rent review clause. Check how and when rent is reviewed, commonly to open market rent and often "upward only" (it can go up but not down). This can significantly increase your costs over the term.
4. Repairing obligations
Watch the repairing clause. Many commercial leases are "full repairing and insuring" (FRI), making you responsible for keeping the premises in good repair, potentially even better than you found them. Consider negotiating a schedule of condition to cap your liability to the state at the start, and budget for dilapidations at the end.
5. Service charge
In multi-let buildings you'll pay a service charge for the upkeep of common parts. Check what it covers, whether there is a cap, and how it is calculated.
6. Alienation (assigning or subletting)
Can you assign (transfer) or sublet the lease if your needs change? Most leases require the landlord's consent (usually "not to be unreasonably withheld"). A flexible alienation clause is valuable if you might move or downsize.
7. Break clauses
A break clause lets you (or the landlord) end the lease early. Check the dates, notice period and conditions, break clauses are strictly construed, and tenants often lose the right to break by missing a condition (e.g. rent not fully paid, or premises not handed back with vacant possession).
8. Use and alterations
- Permitted use, make sure the lease allows your business use (and check planning).
- Alterations, what can you change, and do you need consent (a licence for alterations)? Remember reinstatement obligations at the end.
9. Costs and tax
- SDLT (Stamp Duty Land Tax may be payable on the lease (calculated on any premium and the net present value of the rent)) file the return even if no tax is due.
- Rent deposit, the landlord may require a deposit (governed by a rent deposit deed).
- Your costs, you may be asked to pay the landlord's legal/agent costs; this is negotiable.
10. Get advice before you sign
Commercial leases bind you for years and contain traps for the unwary. Have a solicitor review the lease and a surveyor advise on rent, repair and condition before you commit, it is far cheaper than fixing problems later.
Key takeaways
- Know whether the lease is inside or outside the 1954 Act (security of tenure / contracting out).
- Scrutinise rent review (often upward-only), repairing liability (FRI, consider a schedule of condition), and service charge.
- Check alienation (assign/sublet), break clause conditions, permitted use and alterations/reinstatement.
- Budget for SDLT, deposits and costs, and take legal and surveying advice before signing.
Sources
- Landlord and Tenant Act 1954, Part II (security of tenure; contracting out via the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003)
- SDLT on leases (Finance Act 2003, premium and net present value of rent)
- Commercial leasing practice in England & Wales (rent review, FRI repairing obligations, service charges, break clauses, alienation)
--- This article is general information about the law of England & Wales as at 2026, not legal advice. For advice on your circumstances, consult a qualified solicitor.