I’ve been writing about commercial property for long enough to notice one pattern that comes up again and again: tenants sign a lease, get the keys, and only later discover they can’t actually run the business they planned. The culprit is almost always the permitted use clause — that short paragraph buried in the small print that says what you can and cannot do on the premises. It sounds simple, but the legal mechanics are surprisingly tricky, and the consequences of getting it wrong can be expensive.
Here’s what you actually need to know.
What a Permitted Use Clause Actually Does
The most important thing to understand is that the type of covenant you have changes everything. An absolute user covenant means the lease says you can only use the property for one specific purpose — and the landlord can say no to any change for any reason at all. A qualified user covenant means you need the landlord’s consent, but here’s the catch: under section 19(3) of the Landlord and Tenant Act 1927, the landlord may require a reasonable sum as a condition of giving consent, but there is no implied statutory reasonableness requirement for the consent decision itself. That’s different from assignment or alterations, where the law does force the landlord to act reasonably.
What I’d do: if you’re negotiating a new lease, push for a fully qualified covenant on use. It’s one of those things that feels like a minor wording change but can save you thousands down the line if your business model shifts.
Why the Type of Covenant Affects Your Rent and Your Options
A narrow user clause doesn’t just limit what you can do — it also depresses the hypothetical tenant pool when it comes to rent review. Valuers assume a wider notional permitted use to protect the landlord’s position, but if your lease is genuinely restrictive, the headline rent could be lower than it would be under a broader clause. That sounds good until you want to assign the lease or sublet, and the narrow use scares off potential takers.
Take a real scenario: you run a coffee shop under a lease that says “café use only.” A year in, you want to add a small retail section selling beans and mugs. Under an absolute covenant, the landlord can refuse outright. Under a bare qualified covenant, they can say yes or no without giving a reason — and there’s no statutory time limit on their decision, unlike with assignment applications under the Landlord and Tenant Act 1988. That delay alone can kill a business opportunity.
What I’d notice from covering this area: the businesses that get caught out are almost always the ones that assumed “qualified” meant “reasonable.” It doesn’t. If your lease doesn’t include the words “not to be unreasonably withheld,” you’re in a weaker position than you think.
Where People Get Tripped Up
Assuming Qualified Means Reasonable
This is the most common mistake I see. A qualified user covenant means you need consent — but the law does not imply a duty of reasonableness on the landlord’s decision. The Landlord and Tenant Act 1988, which forces landlords to respond to assignment applications within a reasonable time and give reasons for refusal, does not apply to change-of-use requests. So a landlord can say no, take months to reply, or demand an unreasonable sum — and you have no statutory recourse unless your lease contains an express reasonableness clause.
Ignoring the 2020 Use Classes Overhaul
Before September 2020, commercial leases commonly referred to specific use classes like A1 (retail), A2 (financial services), or B1 (offices). The government then created Class E, which amalgamates most of those into a single category. If your lease was drafted before 2020 and still references the old classes, it may be unintentionally narrow. A tenant who thinks they have “Class E” flexibility might actually be locked into a much tighter description. On renewal, this is worth reviewing carefully.
Overestimating the Power of a Keep-Open Covenant
Landlords sometimes include a clause requiring the tenant to keep the premises open for trade during certain hours. In England, the House of Lords made clear in Co-operative Insurance Society v Argyll Stores (Holdings) Ltd (1998) that specific performance — a court order forcing the tenant to stay open — is not ordinarily available. The landlord’s only remedy is damages, which are notoriously hard to quantify. In Scotland, the position is different: the Court of Session in Highland and Universal Properties Ltd v Safeway Properties Ltd (2000) indicated that specific implement may be available, giving Scottish landlords a stronger hand.
→ Scroll right to see all columns
| Covenant Type | Landlord Can Refuse? | Statutory Reasonableness? | Time Limit on Decision? |
|---|---|---|---|
| Absolute | Yes, for any reason | No | No |
| Bare qualified | Yes, without giving reason | No (s.19(3) only covers sum) | No |
| Fully qualified | Only if reasonable | Yes (express clause) | No statutory limit |
What I’d do: if you’re taking over an existing lease, check the date it was drafted. Anything pre-2020 needs a close look at the use class wording. And if the lease has a keep-open clause, understand that in England it’s more of a negotiating lever than an enforceable threat.
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How to Protect Yourself When Negotiating or Reviewing a Commercial Lease
Check the Covenant Type First
Before you sign anything, identify whether the user clause is absolute, bare qualified, or fully qualified. If it’s absolute, you have no room to pivot later. If it’s bare qualified, you need to add an express reasonableness clause — or at least understand that the landlord holds most of the cards. If the landlord won’t budge on the wording, consider whether the permitted use is broad enough to cover any realistic change in your business over the lease term.
Review the Use Class Against Your Actual Plans
If the lease references a specific use class, check whether it matches what you intend to do — and what you might want to do in three years. A lease that says “Class E (retail)” might not cover a hot-food takeaway or a gym, even though both fall under the broader Class E umbrella. If your business model involves multiple income streams, make sure the clause is drafted to cover all of them. If the lease is a renewal of a pre-2020 document, ask your solicitor to update the use class reference to reflect the current system.
Understand the Rent Review Implications
A narrow user clause can work in your favour at rent review by depressing the hypothetical tenant pool and therefore the headline rent. But it can also make it harder to assign or sublet later. If you’re planning to grow or sell the business within the lease term, a broader permitted use clause is usually worth the negotiation effort. If you’re a landlord, a rent review clause that assumes a wider notional permitted use can protect your position.
Consider a Turnover Rent if a Keep-Open Clause Is Proposed
If the landlord insists on a keep-open covenant, and you’re in England where it’s largely unenforceable, you might suggest a turnover rent instead. This gives the landlord a share of your gross turnover, creating a mutual incentive for you to trade successfully. It’s a more practical arrangement than a clause that a court won’t enforce anyway.
What I’d do: if I were a tenant, I’d spend the money on a solicitor to review the user clause before signing — not after. The cost of getting it wrong is far higher than the legal fee. If you need a quick second opinion on a specific point, a tenant landlord lawyer can often clarify the risks in a single conversation.
Can my landlord refuse consent for change of use without giving a reason? ▾
What happens if my lease still uses old use classes from before 2020? ▾
Can a landlord force me to stay open for business? ▾
Does the Landlord and Tenant Act 1988 apply to change-of-use requests? ▾
What’s the difference between a qualified and a fully qualified covenant? ▾
The permitted use clause is one of those lease terms that looks simple on paper but has layers of legal nuance underneath. The type of covenant, the use class reference, and the presence or absence of a reasonableness obligation all affect what you can actually do with the space. My advice: read it before you sign, broaden it if you can, and never assume “qualified” means “reasonable.” If this was useful, you might also want to read future-proofing your UK commercial lease.
Sources and Further Reading
Key considerations when renting a commercial space in the UK — A broader look at what to check before signing any commercial lease, from rent review to service charges.
Commercial lease user clause guide. Letsafe UK, 2024.
Permitted use commercial lease overview. RLS Law, 2024.
