The headline rent is only part of the cost of a commercial lease. Tenants are often caught out by the upfront sums needed to get in, and the recurring charges that pile on top of rent. Here is a plain-English guide for businesses in England and Wales.
Initial (upfront) costs
When you take a lease, expect to pay some or all of these at the start:
- Rent in advance. Rent is usually payable in advance (often quarterly), so you pay the first instalment on day one, sometimes plus VAT.
- Rent deposit. The landlord may require a rent deposit (e.g. 3–6 months' rent) held as security under a rent deposit deed.
- Stamp Duty Land Tax (SDLT). SDLT may be payable on the grant of the lease, calculated on any premium and on the net present value (NPV) of the rent over the term. A return may be needed even if no tax is due.
- Land Registry registration fees. Leases over seven years must be registered at HM Land Registry (with a fee).
- Premium (if any). Some leases require a one-off premium (a capital sum) to acquire the lease.
- Professional fees. Your own solicitor and surveyor fees, and sometimes the landlord's legal/agent costs (negotiable).
- Fit-out costs. Getting the premises ready for your business (often substantial, see our separate guide).
- Guarantee/agreement for lease costs if applicable.
Ongoing (recurring) costs
During the term, watch for:
- Rent, the main ongoing cost, subject to rent review (often upward only) at set intervals.
- Business rates, payable to the local authority on most commercial premises (check any reliefs, e.g. small business rate relief).
- Service charge, in multi-let buildings, your share of maintaining common parts, lifts, security, etc. Check whether it is capped.
- Insurance rent, you usually reimburse the landlord's buildings insurance premium for the property.
- Utilities and outgoings, gas, electricity, water, telecoms, and other running costs.
- Repairs and maintenance, under a full repairing lease you keep the premises in good repair, which can mean significant spend, plus dilapidations at the end.
- VAT, if the landlord has "opted to tax", VAT is added to rent and service charge (recoverable if you are VAT-registered and making taxable supplies).
The sting in the tail: end-of-lease costs
Budget early for end-of-term costs:
- Dilapidations, the cost of putting the premises back into repair (and reinstating any alterations) as the lease requires; this can be a large, unexpected bill.
Practical tips
- Ask for a full breakdown of all costs before committing, not just the rent.
- Negotiate the service charge cap, rent-free periods, who pays landlord's costs, and a schedule of condition to limit repairing liability.
- Factor in SDLT, registration, fit-out and deposit in your cash-flow plan.
- Take legal and surveying advice before signing.
Key takeaways
- Initial costs: rent in advance, rent deposit, SDLT, Land Registry fees, any premium, professional/landlord's fees, and fit-out.
- Ongoing costs: rent (with upward-only rent reviews), business rates, service charge, insurance rent, utilities, repairs, and possibly VAT.
- Don't forget end-of-lease dilapidations and reinstatement.
- Get a full cost breakdown and negotiate caps, rent-free periods and a schedule of condition before signing.
Sources
- SDLT on leases (Finance Act 2003, premium and net present value of rent); HM Land Registry registration of leases over seven years
- Commercial leasing practice in England & Wales (rent deposits, service charges, insurance rent, rent review, dilapidations)
- VAT on commercial property (option to tax)
--- 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.