Nearly 95% of UK businesses lease their commercial premises rather than own them, according to recent industry data. That figure alone tells you how central leasing is to running a business in this country. But what I’ve noticed over the years covering this space is that most tenants sign their lease with far less scrutiny than they’d give a mobile phone contract — and that mismatch can cost them dearly.
The problem is that commercial leases are dense, long, and full of terms that don’t exist in residential contracts. Most small business owners I speak with only realise what they’ve signed after a problem surfaces — a repair bill they didn’t expect, a rent review they can’t challenge, or a break clause they’ve missed by a day. That’s why I put this guide together. It covers the lease types you’ll encounter, the 2025 and 2026 legal changes that affect your rights, and the practical steps you can take before you put pen to paper. Here’s what you actually need to know.
What a commercial lease actually is — and the types you’ll see
A commercial lease is a contract between you (the tenant) and a landlord that gives you the right to use a property for business purposes in exchange for rent. That sounds straightforward, but the type of lease you sign determines who pays for what — and the differences are substantial.
If you’re looking at an FRI lease, you’re taking on obligations that can run into tens of thousands of pounds. A leaking roof or a failed heating system becomes your problem, not the landlord’s. On the other end of the spectrum, a gross or full-service lease means the landlord covers all property expenses within a single rent payment — simpler, but the rent will be higher to reflect that. Between those extremes you’ll find internal repairing leases (you maintain the interior, the landlord handles the structure and exterior) and modified gross leases (a hybrid where specific expenses are shared). There’s also the turnover lease, where you pay a base rent plus a percentage of your revenue — common in retail and hospitality. If that sounds relevant, I’d suggest reading our guide on understanding turnover rent for a deeper look at how the percentages work in practice.
My take? If you’re a small business with limited capital reserves, an FRI lease on an older building is a genuine risk. I’d lean toward an internal repairing lease or a gross lease unless you’ve got the cash flow to handle unexpected structural work.
Why the 2025 and 2026 legal changes matter for your lease
Two major reform streams are reshaping commercial leasing in England and Wales, and they affect leases signed now as well as those coming up for renewal.
First, the Right to Manage (RTM) threshold for mixed-use buildings increased from 25% to 50% non-residential floorspace on March 3, 2025. That means if you run a retail unit, office, or hospitality venue in a building where up to half the space is commercial, you and other tenants may now qualify for RTM — giving you more control over building management. It’s a meaningful shift for tenants in smaller mixed-use blocks who previously fell below the threshold.
Second, the proposed ban on upwards-only rent reviews is gaining serious traction. The Law Commission has issued provisional conclusions on modernising the Landlord and Tenant Act 1954, and the English Devolution and Community Empowerment Bill includes a specific proposal to ban upwards-only reviews in new commercial leases. If enacted, rent reviews would need to reflect market conditions in both directions — up and down. That would be a fundamental change. Upwards-only reviews have historically given landlords income certainty, and removing them could shift how leases are structured and valued. The Bill has completed its first reading in Parliament, so this is moving.
On the business rates front, a new revaluation takes effect in England on April 1, 2026, updating rateable values based on rental values as of April 2024. From that date, retail, hospitality, and leisure properties with a rateable value below £500,000 will benefit from lower multipliers, while properties at £500,000 or above fall under a higher “high-value” multiplier. If your business falls into that lower bracket, the change could reduce your overheads. If you’re above it, you’ll want to factor the increase into your budget.
I’ve seen tenants overlook business rates entirely during lease negotiations, assuming they’re fixed. They’re not — and the 2026 revaluation is a good reason to check your property’s rateable value before you sign.
Where people go wrong with commercial leases
Most mistakes I see come down to the same few patterns. Here are the ones that cause the most damage.
Treating break clauses as optional extras
A break clause gives you the right to terminate a lease early — but only if you comply with every single condition attached to it. Courts have repeatedly upheld that even minor procedural errors invalidate break notices. Common conditions include giving vacant possession, being up to date with all rent payments, and having complied with repair covenants. Miss one, and you’re locked in for the full term. If you’re negotiating a lease, push for a break clause with clear, achievable conditions — and then follow them to the letter when the time comes.
Underestimating repair and dilapidations liability
Under an FRI lease, you’re responsible for returning the property in the condition specified by the lease — which is often “as new” or to a schedule of condition. At the end of the term, landlords can serve a dilapidations claim for the cost of bringing the property up to that standard. These claims can run into six figures for a modest unit. The fix? Negotiate a schedule of condition at the start, which photographs and documents the property’s actual state. That gives you a baseline and limits what you can be asked to restore.
Ignoring service charge caps and audit rights
Service charges cover the landlord’s costs for maintaining common areas, insurance, and building services. Without a cap or audit rights, you’re exposed to whatever the landlord spends — including inefficient management or unnecessary upgrades. I’d always negotiate a cap (say, a maximum annual increase of 5% or linked to RPI) and the right to audit the service charge accounts annually. If the landlord refuses, that’s a red flag.
Overlooking EPC and MEES requirements
From the second half of 2026, EPC rules are tightening significantly. New certificates will show multiple performance metrics rather than a single score, validity periods may shorten, and landlords will need to maintain a valid EPC throughout a tenancy — not just at grant or renewal. Listed and heritage buildings may also be brought within the Minimum Energy Efficiency Standards (MEES) framework for the first time. If you’re leasing a property with a low EPC rating now, you could face compliance costs or restrictions later. Check the EPC before you sign, and factor potential upgrade costs into your budget.
→ Scroll right to see all columns
| Change | Effective | What it means for tenants |
|---|---|---|
| Business rates revaluation | April 2026 | Rateable values updated; lower multipliers for retail/hospitality/leisure under £500k RV |
| EPC reform | Late 2026 | Multiple metrics, shorter validity, ongoing compliance required |
| Ban on upwards-only rent reviews | Proposed (Bill in Parliament) | New leases would allow downward as well as upward reviews |
| RTM threshold increase | March 2025 | Mixed-use buildings up to 50% commercial now qualify |
If you’re unsure about any of these points, speaking with a tenant landlord lawyer before you sign is money well spent. A single hour of advice can save you from a five-figure mistake.
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How to negotiate and review a commercial lease — step by step
Here’s the practical process I’d follow if I were signing a commercial lease tomorrow. Each step addresses a specific risk from the sections above.
Get a schedule of condition before you move in
This is your single best defence against excessive dilapidations claims. A schedule of condition is a photographic and written record of the property’s state at the start of the lease. It’s attached to the lease as a reference point, so you’re only required to return the property to that condition — not to “as new.” Without it, the landlord can argue the property should be returned in perfect repair, regardless of its actual state when you took possession. Hire a surveyor to prepare it, and make sure both parties sign it.
Negotiate the rent review mechanism
Given the proposed ban on upwards-only reviews, now is the time to push for a review that can go both ways. If the landlord resists, negotiate a cap on increases — say, a maximum of 5% per review or linked to RPI with a ceiling. Also push for longer review periods (every five years rather than every three) to reduce the frequency of adjustments. If you’re in a sector where turnover leases are common, our guide on renting roadside retail space covers how location affects the numbers.
Check the EPC and plan for 2026 changes
Ask for the current EPC certificate before you make an offer. If the rating is below C, factor in the cost of upgrades — because the 2026 reforms are likely to push minimum standards higher. If the property is listed or in a conservation area, ask the landlord whether they’ve assessed how the new rules might apply. You don’t want to be stuck with a property you can’t legally let in two years’ time.
Review assignment and subletting terms
If your business grows or contracts, you may need to assign the lease (transfer it to someone else) or sublet part of the space. Many leases require the landlord’s consent, which can’t be unreasonably withheld — but some add conditions like profit-sharing on assignment or requiring an authorised guarantee agreement (AGA), which keeps you on the hook even after you leave. Negotiate to remove profit-share clauses and limit AGA requirements to a fixed period, say two years.
- 1Commission a schedule of conditionHire a surveyor to document the property’s state before you move in. Attach it to the lease as the baseline for dilapidations.
- 2Negotiate rent review termsPush for a two-way review or a capped increase. Aim for five-year review periods to reduce frequency.
- 3Check the EPC and plan for upgradesRequest the current certificate. If the rating is low, budget for improvements before the 2026 rules tighten.
- 4Review assignment and subletting clausesRemove profit-share terms and limit AGA duration. Ensure consent cannot be unreasonably withheld.
- 5Get legal advice before signingA property lawyer reviews the full lease and flags risks you’ve missed. This is non-negotiable for any lease over one year.
If you’re looking at a high-footfall location, the dynamics around rent and foot traffic are different. Our piece on renting high-footfall commercial space covers what to watch for in those leases.
Frequently asked questions
Can I walk away from a commercial lease early? ▾
What happens if my landlord refuses to maintain the structure? ▾
Are service charges capped by law? ▾
Will the proposed ban on upwards-only rent reviews affect my existing lease? ▾
What’s the difference between assignment and subletting? ▾
Do I need a solicitor to review a commercial lease? ▾
If this was useful, you might also want to read Sustainable Spaces: How Green Leases Are Shaping the UK Commercial Property Market.
Sources and Further Reading
Key Considerations for Your Corporate Headquarters Lease — A deeper look at negotiating larger commercial leases, including rent-free periods and fit-out contributions.
The Future of UK Retail: Reimagining Commercial Spaces for a New Era — Explores how changing retail patterns are influencing lease structures and property values.
Commercial Lease Agreement Guide UK 2026. Connaught Law, 2025.
Commercial Property Law Changes Coming 2026. SO Legal, 2025.
Key Legislative and Legal Updates for 2026. James & Sons, 2025.
