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Commercial leases are complex legal documents that can significantly impact your business operations and financial commitments for many years. Whether you're a tenant seeking favorable terms or a landlord protecting your investment, expert legal guidance is essential to negotiate agreements that protect your interests and avoid costly disputes.
Rent and Financial Terms:
Operational Terms:
Full Repairing and Insuring (FRI):
Internal Repairing (IR):
Turnover Leases:
Legal Fees:
Additional Costs:
Commercial lease terms can significantly impact your business for many years. Professional legal advice ensures you understand all obligations and negotiate terms that support your business objectives.
This information is for general guidance only and does not constitute legal advice. For specific legal advice tailored to your situation, please consult with a qualified solicitor.
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Find Your SolicitorCommon questions about commercial lease negotiations and how our solicitors can help
A commercial lease is a legal agreement between a landlord and tenant for business premises, covering rent, lease terms, repair obligations, permitted use, and other conditions. Commercial leases are typically longer and more complex than residential tenancies, with significant business implications requiring specialist legal advice to negotiate favorable terms.
Main commercial lease types include Full Repairing and Insuring (FRI) where tenants handle all repairs and insurance, Internal Repairing (IR) where tenants maintain interiors only, and turnover leases where rent is based on business revenue. Each type has different cost implications and risk allocations.
A rent review clause allows periodic adjustment of rental amounts, typically every 3-5 years. Common types include open market reviews (based on current rental values), index-linked reviews (tied to inflation), and turnover reviews (percentage of business income). Most commercial rent reviews are upward-only, meaning rent cannot decrease.
A break clause allows early lease termination by landlord or tenant at specified dates, subject to conditions like giving proper notice, paying all rent, and sometimes meeting repair obligations. Break clauses provide flexibility but require careful negotiation of conditions and strict compliance to be exercised successfully.
Assignment and subletting rights depend on your lease terms. Most commercial leases allow assignment and subletting with landlord's consent, which cannot be unreasonably withheld. However, landlords can impose conditions like guarantees, rent reviews, or financial tests. Professional advice ensures compliance with complex assignment procedures.
Dilapidations are breaches of lease repair obligations, typically claimed at lease end. Landlords can claim costs for bringing property to required standard, often involving substantial sums. Tenants can negotiate dilapidations claims and sometimes agree cash settlements rather than carrying out works.
Commercial lease legal fees typically range from £1,500-£5,000 for new leases, £1,000-£3,000 for renewals, and £1,000-£2,500 for assignments. Additional costs may include landlord's legal costs (often tenant's responsibility), surveyor fees, and Stamp Duty Land Tax on lease premiums.
Security of tenure under the Landlord and Tenant Act 1954 gives qualifying business tenants the right to remain in premises at lease end and request a new lease. Landlords can only refuse renewal on specific grounds like redevelopment or substantial breach. This protection can be excluded by agreement.
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