The main things you should check in an office lease before signing are the lease length and break clauses, rent review terms, repair and maintenance obligations, service charge provisions, and whether the lease is protected under the Landlord and Tenant Act 1954.
A commercial lease is a substantial commitment that can tie your business to a property and significant costs for years. Getting it wrong can mean unexpected expenses, limited flexibility, or legal disputes with your landlord.
What Office Lease Length and Break Clauses Should I Look For?
You should look for an office lease length that matches your business growth plans whilst including break clauses for flexibility. Most London office leases run for 3 to 10 years, with 5 years being typical for small to medium businesses.
Shorter leases give you flexibility to relocate as your business changes, but landlords may charge higher rent. Longer leases provide stability and often better rental rates, but lock you in even if circumstances change.
Break clauses let you end the lease early on specific dates, usually every 2 or 3 years. Check whether the break clause is mutual or tenant-only, and what conditions must be met to exercise it, such as being up to date with rent.
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How Will My Office Rent Change During the Lease?
Your office rent will change according to rent review clauses, which typically trigger every 3 to 5 years and tie increases to market rent or retail price index (RPI). Understanding these terms is crucial as they directly affect your future costs.
Market rent reviews reset your rent to current market rates, which could mean substantial increases in strong markets. Some leases include rent caps limiting annual increases, whilst others are “upwards only”, meaning rent can never decrease even if market rates fall.
Negotiate rent-free periods at the start if you need time for fit-out works. These are common in London and can range from a few weeks to several months.
What Are My Office Repair Responsibilities in the Lease?
Your office repair responsibilities depend on whether you have a full repairing and insuring (FRI) lease or an internal repairing lease. FRI leases make you responsible for all repairs including the structure and exterior, whilst internal repairing leases limit your obligations to the interior of your space.
Most modern office buildings use internal repairing leases where the landlord maintains the structure, exterior, and common areas through service charges. Check the schedule of condition, which records the property’s state when you take possession and protects you from having to return it in better condition than you received it.
What Office Service Charges Will I Pay?
Office service charges cover building maintenance, common area costs, insurance, and management fees, and typically add 15% to 30% on top of your base rent. These charges can be substantial and may increase annually.
Review whether service charges are capped and what major works might be planned. Ask for historical service charge accounts to see typical costs and whether charges have been stable or increasing rapidly.
Is My Office Lease Protected by the Landlord and Tenant Act 1954?
Your office lease is protected by the Landlord and Tenant Act 1954 unless it was specifically “contracted out” at the start of the tenancy. Protection gives you an automatic right to renew your lease when it expires, providing valuable security for your business.
Contracted out leases are common for shorter terms or where landlords want guaranteed vacant possession at lease end. Without protection, your landlord can simply ask you to leave when the lease expires with no obligation to offer renewal.