Understanding Commercial Leases In The UK

If you run a business in the UK, the chances are you’ll sign a commercial lease at some point. What I’ve noticed over the years is that many people treat these documents as a formality — something to skim and sign. But the figures tell a different story. The government’s English Devolution and Community Empowerment Bill, published in July 2025, proposes a ban on upwards-only rent reviews in new commercial leases, which could fundamentally change how much you pay over the life of your tenancy. That single change, if it becomes law in late 2026 or 2027, would reshape the financial landscape for thousands of businesses. Here’s what you actually need to know.

I’ve been covering commercial property for a while now, and the questions I hear most often are about what’s actually changing and what it means for the bottom line. The truth is, a lot of the rules that have governed commercial leases for decades are being rewritten. If you’re looking for a retail lease or any commercial space, you need to understand these shifts before you sign anything. A good first step is to speak with a tenant landlord lawyer who can walk you through the specific terms of your agreement.

What a commercial lease actually is — and why the old rules are changing

Most people assume a commercial lease is just a rental agreement for a shop or office. It’s that, but it’s also a legal document that determines who pays for what, who can walk away and when, and what happens if the market shifts. The key concept here is security of tenure.

The Law Commission completed its phase 1 consultation on 19 February 2025 and has provisionally concluded that the current model for contracting out of security of tenure is the right one. But here’s the twist — they’ve also proposed increasing the minimum term for protected business tenancies from six months to two years. That means if you’re a startup or a pop-up business, you might find it harder to get a short-term lease with full protection. What I’d do in that situation is look at whether a contracted-out lease (one where you give up your renewal rights) still makes sense for your business plan, or whether you need to negotiate a break clause instead.

Why these changes matter for your business

The most immediate change is the proposed ban on upwards-only rent reviews. Under current law, many commercial leases include a clause that says rent can only go up, never down. That might have worked when property values always rose, but it’s a real problem when the market dips. The English Devolution and Community Empowerment Bill, published on 10 July 2025, would make such provisions unenforceable in new and renewal leases. The ban applies to all commercial leases, with limited exemptions for agricultural holdings, tenancies of six months or less, and farm business tenancies.

To give you a sense of the scale, consider this: if you’re a retailer with a rateable value below £500,000, the new business rates structure from April 2026 will give you a lower multiplier. But if your rateable value is £500,000 or more, you’ll fall under a higher “high-value” multiplier. That’s a significant cost difference. I’ve seen businesses caught off guard by rates bills that eat into margins they didn’t have. The way business rates work when renting is something every tenant should understand before signing.

Where people go wrong with commercial leases

I’ve seen the same mistakes come up again and again. Here are the ones that cost the most.

Ignoring the service charge and the RICS code update

The updated RICS Professional Standard, Service charges in commercial property (2nd edition), took effect from 31 December 2025. It’s compulsory for all RICS-accredited professionals. But here’s the catch — the code does not override your lease terms and is not legally binding. It sets industry benchmarks and is a vital reference point for negotiations and dispute resolution, but if your lease says something different, the lease wins. What I’d do is compare your service charge provisions against the RICS code before you sign. If they diverge, ask why. A service charge benchmarking guide can help you spot the red flags.

Not checking the EPC before signing

Significant updates to Energy Performance Certificates are expected in the second half of 2026. Shorter validity periods are likely, potentially reducing the current ten-year lifespan for new certificates. There’s also a proposed requirement for landlords to maintain a valid EPC throughout a tenancy, rather than only at grant or renewal. And listed and heritage buildings may be brought within EPC and Minimum Energy Efficiency Standards requirements for the first time. If you’re taking on a lease in an older building, that could mean unexpected costs to improve energy performance. Check the EPC rating before you commit.

Overlooking the Assets of Community Value changes

The same Bill that bans upwards-only rent reviews also proposes wide-ranging changes to the Assets of Community Value framework. The definition of community value would be widened to include properties that contribute to a local community’s economic wellbeing or interest, alongside the existing social tests. Qualifying use may be assessed by reference to “a time in the past,” which could capture vacant or converted properties. A new statutory category of “sporting asset of community value” would cover outdoor sporting grounds with spectator accommodation. Unlike standard ACV listings, such designations would not expire — they remain on the register indefinitely. The reforms also introduce a ‘preferred buyer’ status, meaning if a community group offers a valuer-determined market value, property owners could be prevented from selling to others for up to 18 months. If you’re buying or selling a commercial property, this could delay your transaction significantly.

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Assuming Business Property Relief will cover everything

From 6 April 2026, Business Property Relief and Agricultural Property Relief will be combined into a single £1 million allowance at 100%. Any qualifying value above that threshold will receive only 50% relief, creating an effective 20% inheritance tax charge on the excess. Shares in unlisted companies, including AIM-listed shares, will also receive only 50% relief. If you own commercial property through a company, this could affect your estate planning significantly. What I’d do is review your ownership structure now, before the April 2026 deadline.

How to approach your next commercial lease

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Negotiate the rent review clause now

Even though the ban on upwards-only rent reviews isn’t law yet, you can still negotiate a more balanced clause. Ask for a rent review that can go down as well as up, or at least one that’s capped at a certain percentage. If the landlord refuses, you have a choice — walk away or factor in the risk. A guide to understanding market rent can help you benchmark what’s reasonable.

Check the EPC and plan for the 2026 changes

Before you sign, get a copy of the current EPC and check its expiry date. If it’s due to expire soon, you could be liable for improvements under the new rules. The proposed requirement to maintain a valid EPC throughout the tenancy means you can’t just ignore it after move-in. Factor the cost of potential upgrades into your budget. A smoke alarm with a 10-year battery is a small example of the kind of compliance cost that can add up, but energy improvements are a much bigger line item.

Understand the business rates revaluation

The new revaluation on 1 April 2026 updates rateable values based on rental values as at 1 April 2024. If your property’s rateable value is close to £500,000, check it carefully. A small difference could push you into the higher multiplier bracket. You can appeal your rateable value if you think it’s wrong, but the process takes time. Start early.

Review your security of tenure position

If the minimum term for protected tenancies increases to two years, short-term leases under that threshold will automatically be contracted out. That means you lose your right to renew. If you need flexibility, negotiate a break clause instead. If you want certainty, push for a protected lease even if it’s short. A look at commercial property for startups shows how different businesses approach this trade-off.

• 1
  Get the current EPC and check its expiry

  Ask the landlord or agent for the certificate. Note the rating and the expiry date. If it’s within two years, plan for an upgrade.

• 2
  Review the rent review clause

  Is it upwards-only? If so, negotiate for a review that can go both ways. If the landlord refuses, consider whether the location justifies the risk.

• 3
  Check the service charge against the RICS code

  Compare the service charge provisions in your lease against the updated RICS Professional Standard. If they differ, ask the landlord to explain or amend.

• 4
  Confirm the security of tenure position

  Is the lease protected or contracted out? If it’s contracted out, you have no automatic right to renew. Negotiate a break clause if you need flexibility.

Frequently asked questions

Sources and Further Reading

Your guide to commercial space renting and service charges — A practical breakdown of what service charges cover and how to challenge unfair costs.

Understanding catchment areas when renting commercial space — How location data affects your lease decision and what to look for in a catchment analysis.

UK real estate sector 2026 and beyond. Charles Russell Speechlys, 2026.

Commercial property law changes coming 2026. So Legal, 2026.

Key legislative and legal updates for 2026. James & Sons, 2026.