Negotiating Commercial Leases: Tips for Tenants & Landlords

Commercial leases are often one of the most significant legal and financial commitments a business or property owner could make. Regardless of if you’re taking on a premises for the first time or managing a portfolio of commercial properties, the terms of which you agree upon can have long-lasting implications.

While many commercial leases follow very similar structures, there’s no such thing as a “standard” lease. Each agreement will uniquely reflect how the property will be used, the commercial priorities of both parties and the levels of risk which each side is willing to take on. Taking the right amount of time to negotiate terms carefully can help avoid disputes, unexpected costs and restrictions later on.

Below, we have set out some practical considerations that both tenants and landlords should consider when negotiating commercial leases.

For Tenants: Securing Flexibility and Cost Certainty

Commercial leases have the capacity to shape how a business operates day to day. It’s not just a contract surrounding rent costs. The length of the lease, repairing obligations and restrictions on use can all affect growth plans and financial stability.

Start with the Heads of Terms

The “Heads of Terms” document lays out the groundwork for the commercial agreement before the lease has been drafted. This is the best point in time to try and negotiate key issues.

Tenants should ensure there is clarity around:

• The rent and how it will be reviewed

• Service charges and insurance contributions

• Responsibility for repairs and maintenance

• Any incentives, such as rent-free periods

Addressing these points before the first draft can reduce the risk of delays or disagreements once solicitors become involved.

Lease Length and Break Clauses

It’s common for landlords to prefer longer leases, but tenants should carefully consider the durations of their commitment.

Key points to consider include:

• Whether the lease length aligns with your business plan

• The availability of break clauses, allowing you to exit early

• Any conditions attached to exercising a break, such as rent being fully paid

Break clauses are in place to provide businesses with valuable flexibility, particularly for growing businesses or those entering a new market.

Rent and Rent Reviews

Rent reviews are one of the most common sources of disputes when they haven’t been clearly drafted.

Tenants may wish to:

• Understand how often rent reviews take place

• Negotiate review mechanisms that reflect market conditions

• Avoid increase-only reviews where possible

Knowing how rent may change over time helps with budgeting and long-term planning.

Repairing and Maintenance Obligations

The majority of commercial leases are drafted on a full repairing and insuring basis, this means that it’s the responsibility of the tenants to keep the property in good condition and insured.

Before agreeing, tenants should:

• Understand the condition of the property at the start of the lease

• Consider requesting a schedule of condition to limit future liability

• Clarify which repairs fall to the landlord, particularly for structural elements

Being obligated for repairs can carry a significant cost, so it’s important to know exactly what you are signing up for.

Alterations, Assignment and Subletting

Businesses are constantly evolving and that means that their premises may also need to change with them.

Tenants should look closely at clauses dealing with:

• Alterations and whether landlord consent is required

• The ability to assign or sublet the lease if circumstances change

• Any restrictions that could limit future flexibility

Establishing clear and reasonable provisions will help to prevent issues in the case that the business one day outgrows the space or needs to relocate.

For Landlords: Protecting Value While Attracting the Right Tenants

For landlords, a commercial lease is about securing consistent long-term income and protecting the value of your asset. However, overly rigid terms can deter good tenants or lead to disputes that impact your assets profitability.

Clear Allocation of Responsibilities

Well-drafted leases clearly set out each individuals responsibilities.

Landlords should aim for:

• Clear definitions of repair and maintenance obligations

• Service charge provisions that are transparent and justifiable

• Insurance arrangements that protect the property and income stream

Clarity helps manage expectations and reduces the risk of conflict.

Structuring Rent Reviews Sensibly

Rent reviews help to ensure that the rent currently reflects market’s conditions, but they should also be commercially realistic.

Landlords may wish to consider:

• Review intervals that align with market norms

• Valuation mechanisms that are clear and workable

• Avoiding provisions that could price tenants out of occupation

Sustainable rent is often more beneficial than short-term gains followed by vacancy.

Lease Length and Security

Longer leases can offer landlords with income certainty, but maintaining flexibility can also be commercially beneficial.

Landlords should think about:

• The balance between lease length and tenant agreement strength

• Whether to include break clauses and on what terms

• Security such as rent deposits or guarantees where appropriate

These measures can protect landlords while keeping leases attractive.

Control Over Alterations

Protecting the condition and character of a property is a legitimate concern.

Landlords should ensure:

• Alterations require consent where appropriate

• Consent provisions are reasonable and clearly defined

• Reinstatement obligations are clear at lease end

This helps maintain the long-term value of the property.

Assignment and Subletting Controls

Alienation provisions allow landlords to retain control over who occupies their property.

Points to consider include:

• Requiring financial and trading information for incoming tenants

• Setting reasonable conditions for consent

• Ensuring continuity of income where a lease is transferred

Balanced clauses can protect the asset without unduly restricting tenants.

Why Early Legal Advice Matters

Commercial leases are complex documents with long-term consequences. Even the smallest of drafting points can have significant financial and practical implications later on. Regardless of whether you’re taking a lease or granting one, early legal advice can help identify any risks, clarify obligations and support productive negotiations.

At Salehs Solicitors, our commercial property team works with both tenants and landlords to provide advice tailored to their individual objectives. By addressing issues early and taking a commercial approach, we help clients enter leases with no uncertainty.

If you are negotiating a commercial lease or reviewing proposed terms, speaking to one of our solicitors can make all the difference.