A retailer agrees heads of terms
Check permitted use, fit out, opening obligations, service charge, security of tenure and break rights before the full lease is drafted.
Premises · UK business guide
Commercial Leasing for Business Premises
Turn heads of terms into a lease that deals clearly with cost, use, repair, security of tenure, change, assignment and exit.
Jurisdiction: England and Wales. Scotland and Northern Ireland have different property law, terminology and procedures and require jurisdiction-specific advice.
At a glance
- 01
Check the premises and heads of terms
Confirm the property, permitted use, term, rent, incentives, condition and works before detailed drafting begins.
- 02
Allocate cost and operational risk
Read repair, service charge, insurance, alterations, compliance and guarantee obligations as one financial commitment.
- 03
Plan change and exit
Understand renewal, break, assignment, subletting, surrender and end-of-term obligations before signing.
What this guide covers
Make the legal decisions in the right order
A commercial lease determines more than rent and floor area. It can shape how the tenant uses the premises, who pays for repair and compliance, when costs can increase, whether the business can alter or share the space, and how it can leave. Important terms are often agreed in heads of terms before the full lease reaches the lawyers, so that early document deserves careful commercial attention.
The property and the business plan need to fit each other. Check title and landlord authority, planning and permitted use, access, services, condition, fit out, insurance and any superior lease restrictions. Then model rent, service charge, business rates, tax, deposits, guarantees, repair and reinstatement across the full term. For premises in England and Wales, decide expressly whether the tenancy will have security of tenure under Part II of the Landlord and Tenant Act 1954.
Decision path
Work through the issue before committing to a course of action
Start with the first stage, then follow the sections that match the route you identify. Keep a written record of the facts, evidence and decisions.
- 01
Test the premises and heads of terms
Resolve the commercial fundamentals before they become expensive drafting assumptions.
- Property and rights. Confirm the exact premises, access, parking, loading, signage, shared areas, services and any rights the business needs to operate.
- Permitted use. Check the lease wording, planning position, licences and building restrictions against the business's current and expected activities.
- Term and incentives. Record the lease length, start date, rent-free period, break options, rent review and any agreement for lease or conditions before entry.
- Fit out and condition. Agree who completes works, which approvals are needed, how delay is handled and whether a schedule of condition will limit repair exposure.
Checks to make
- Walk the premises and reconcile the plan, access and services with operating needs.
- Confirm planning, licensing, building and superior title restrictions before committing.
- Record rent, incentives, works, condition, break and renewal points in complete heads of terms.
- 02
Model the whole occupancy cost
Treat the lease as a long-term cost system, not a monthly rent figure.
- Rent and review. Understand review dates, assumptions, disregards, indexation, market evidence and the process for resolving disagreement.
- Service charge. Review the services, allocation method, budget, reconciliation, exclusions, caps and any planned major works.
- Repair and reinstatement. A full repairing obligation can require work beyond visible wear. Check the condition evidence, alterations and end-of-term reinstatement duties.
- Tax, rates and security. Include business rates, VAT where applicable, SDLT, insurance contributions, rent deposits, guarantees and professional costs in the model.
Checks to make
- Build an occupancy model covering the entire term and a realistic exit case.
- Review service charge history, planned works, insurance and repair evidence.
- Confirm tax, rates, deposit and guarantee assumptions with the relevant advisers.
- 03
Protect operational flexibility
Check whether the business can adapt the premises, ownership and occupancy as its needs change.
- Alterations. Distinguish structural, non-structural and cosmetic works and identify consent, reinstatement and professional cost requirements.
- Assignment and subletting. Review when the tenant may transfer or share the premises, the consent standard and any guarantee or financial conditions.
- Group and business changes. Check occupation by group companies, sharing arrangements, changes of control and how a future business sale would interact with the lease.
- Compliance and access. Allocate responsibility for laws, energy performance, fire safety, accessibility, asbestos and landlord access without disrupting the business unnecessarily.
Checks to make
- Test alteration, sharing, assignment and subletting clauses against likely business changes.
- Identify every consent, cost, guarantee and reinstatement condition attached to flexibility.
- Align property compliance duties with the people, budgets and evidence needed to perform them.
- 04
Understand renewal, break and exit
Put critical dates and conditions into an operating calendar as soon as the lease is signed.
- Security of tenure. For England and Wales, confirm whether Part II of the Landlord and Tenant Act 1954 applies or has been validly excluded before the tenant becomes contractually bound.
- Break rights. Record the notice window, service method and every condition. A break can fail if the contractual process is not followed precisely.
- Assignment or surrender. If the business needs to leave early, check transfer rights, landlord consent, guarantee exposure, surrender terms and continuing liability.
- End of term. Plan notices, renewal negotiations, dilapidations, reinstatement, utilities, keys, records and the return of any deposit well before expiry.
Checks to make
- Record all break, renewal, review and expiry dates with advance reminders.
- Store signed notices, service evidence, licences, schedules of condition and alteration approvals together.
- Start exit cost and reinstatement planning early enough to preserve commercial options.
Common situations
Where businesses usually need to slow down and check the detail
A tenant wants to alter the premises
Review the alterations clause, planning and building requirements, landlord consent, professional costs and reinstatement obligations before work starts.
The business wants to assign the lease
Check consent conditions, financial tests, authorised guarantee requirements, arrears, repair and how the transfer aligns with any business sale.
A break date is approaching
Audit the notice wording, service method, timing and conditions early, then preserve evidence of compliance through the break date.
Selected reading
Understand the issue before deciding what to do next
Start with these articles for the key rules, then check the official sources before you act.
Commercial leases before signingReview the property, costs, obligations and exit terms that deserve attention before commitment.Five year commercial leasesUnderstand how term, review, break and renewal provisions shape a medium-term commitment.Rent review clausesCheck review machinery, assumptions and dispute processes before the review date arrives.Licence to assignSee how landlord consent and assignment conditions affect a proposed lease transfer.Ending a lease by surrenderUnderstand the agreement and documentation needed when landlord and tenant agree to end early.The Code for Leasing Business PremisesUse the industry code to improve the quality of heads of terms and early lease negotiations.
Primary sources
- Landlord and Tenant Act 1954, Part II
Read the statutory framework for security of tenure, termination and renewal of qualifying business tenancies in England and Wales.
- GOV.UK tenant responsibilities
Official guidance on health and safety, repairs, maintenance and other responsibilities when renting business premises.
- GOV.UK ending a commercial lease early
Check the official overview of break clauses, surrender, assignment, subletting and fixed-term expiry.
- GOV.UK business lease renewal and ending guide
Review the official guide to protected tenancies, contracting out, renewal and termination procedures.
- RICS Code for Leasing Business Premises
Use the professional standard, heads of terms template and checklist for commercial lease negotiations in England and Wales.
Source links checked 2 August 2026. Confirm the current rule before acting.
Questions businesses ask
Quick answers before you take the next step
These answers are general. Check the relevant documents and current official guidance for your particular facts.
Does a commercial tenant automatically have a right to renew?
Not always. In England and Wales, qualifying business tenancies may have security of tenure under the Landlord and Tenant Act 1954, but the protection can be validly excluded before the tenant becomes bound.
Can a tenant end a commercial lease early?
Only through an available route such as a break clause, assignment, subletting or an agreed surrender. Each route has contractual conditions and may leave continuing obligations.
Who pays for repairs?
The lease should allocate repair responsibility. A tenant may accept broad repair obligations even where the premises were already in poor condition, so condition evidence and drafting matter.
Can the tenant transfer the lease when selling the business?
Possibly, subject to the assignment clause and landlord consent. The landlord may require financial information, payment of costs, compliance with existing obligations and a guarantee.
Is SDLT payable on a commercial lease?
It can be, depending on the premium, rent, term and applicable thresholds. Calculate and file on the facts of the transaction using current HMRC rules.
Need help putting this into practice?
Put the right documents and advice behind your decision
Commercial lease reviewReview a proposed commercial lease against the premises, heads of terms and the tenant's operating plans.View fixed-fee serviceRetail lease reviewReview a retail premises lease with attention to use, fit out, trading, service charge and exit risk.View fixed-fee serviceHeads of agreementRecord the main commercial terms and negotiation framework before detailed documents are prepared.View fixed-fee serviceDeed of terminationDocument an agreed ending where the parties need clear release, payment and continuing obligation terms.View fixed-fee service
This guide is general information, not legal, tax or financial advice. The right path depends on the entity, documents and commercial facts.
Related guides
Follow the connected legal decisions
Commercial Contracts and Contract RiskFor contracts governed by England and Wales law, turn the commercial deal into clear rules for scope, payment, liability, intellectual property, changes, termination and disputes.Buying or Selling a BusinessChoose the deal structure, investigate what is really being transferred, allocate liabilities and plan a completion that works after the signatures are collected.Business Structures and Company Set-upCompare sole trader, partnership and limited-company structures through control, liability, tax, administration and plans for growth.