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Last updated: 19 September 2023
Next review: 19 September 2024
If you're setting up a business, or looking to expand to larger premises, you need to find the best property available to suit to your needs.
We've put together the following comprehensive, downloadable guide, to help businesses entering into a commercial property lease:
Before starting your search for property through a commercial agent, you'll need to decide:
Then you can decide if you want to purchase or rent (lease) a property.
A property can be leased in the following ways:
To lease a property, you'll need to sign the appropriate agreement. Some lettings may be on a short-term basis, while others may be for a longer time.
The term of a lease can vary between two to 25 years, but usually runs between three to five years. A short-term lease usually runs from between one to three years. A short lease with options to renew may be more suitable than a longer lease with break clauses.
Under a short term lease, you'll usually only be responsible for the interior of the property. The landlord usually remains responsible for the exterior, dependent on the type of property and the terms offered. You'll also be able to negotiate with the landlord over any aspect of the lease. The Code for Leasing Business Premises aims to provide fairness between a landlord and tenant in negotiating the terms of a lease.
Once basic terms have been negotiated, the landlord or the landlord’s agent will draw up the heads of terms. These are the main details of the proposed letting arrangement.
You will need to pay:
Rent reviews are usual in leases of three years or more. If it's an 'upwards only' rent review, it means that you won't benefit from any decrease in market rent levels.
If the lease is ‘excluded’ from Part II provisions of the Landlord and Tenant Act 1954, you will have no automatic right to stay at the end of the lease.
A lease with protection means you have a right to request a new lease, subject to the provisions of the Landlord and Tenant Act 1954. Your landlord can only refuse on certain grounds.
We strongly recommend that you seek legal advice. Entering into a lease commits you to a legally binding contract with the landlord. You will be legally and financially obligated under the terms of the lease and it's vital that you fully understand those obligations prior to signing a lease.
You'll need to think about these key points and negotiate them with the landlord: