Why It’s Crucial to Get Legal Advice Before Taking a Commercial Lease

In a rising market where good commercial property is becoming harder to come by on favourable terms, there can be a temptation to rush through lease agreements to avoid losing out or facing rent increases. However, many tenants later seek advice only after committing to leases without fully understanding the wider implications. When business circumstances change or downturns occur, tenants often find themselves contractually bound with little recourse.

A commercial property lease is often one of the most significant transactions you will undertake in your lifetime. It is therefore essential to be fully advised before committing.

Key Considerations When Taking a Commercial Lease

• Who is taking the lease? — If the lease is in the name of a company, does the landlord require additional security such as a rent deposit deed or a personal guarantee from a director? Do the directors understand the extent of their personal liability?
• Repairing obligations — Is the lease fully insuring and repairing? Are you aware of the risks if the property requires repairs and your obligations are not limited, for example, by a schedule of condition?
• Break clauses — If you have the option to break the lease early, are the conditions practical and achievable? Can you recover any overpaid rent?
• Security of tenure — Has the lease been excluded from the protections under Sections 24-28 of the Landlord and Tenant Act 1954, which allow tenants to request a new lease? Is this important for your business continuity?
• Stamp Duty Land Tax (SDLT) — How much is payable and can you comply with HMRC’s 30-day filing requirement to avoid fines?
• Land Registry requirements — Is the lease registerable? Are the attached plans compliant with Land Registry standards?

How Franklins Solicitors Can Help

Franklins Solicitors LLP have an experienced team ready to guide you through negotiating and completing new leases. For any queries about commercial leases or other property transactions, please contact Jo Pusey and her team on 01604 828282 or 01908 660966, or email jo.pusey@franklins-sols.co.uk.

Understanding your rights as a commercial tenant is essential prior to entering into a lease for your business.

What is the Landlord and Tenant Act 1954?

The Landlord and Tenant Act 1954 is a central piece of legislation that governs the rights and responsibilities of both landlords and tenants for premises occupied for business purposes.
While the Act has implications for both parties, this article focuses on its impact on tenants, particularly the protections it offers when entering the commercial property market.

Security of Tenure

One of the most significant protections the Act offers is ‘security of tenure’. This ensures that qualifying business tenancies do not automatically end when their contractual term expires. Instead, tenants have a statutory right to remain in the premises and renew their lease, providing greater stability and continuity for their business operations.

Where security of tenure applies, a landlord can only oppose lease renewal on limited grounds, as outlined in Sections 30(1)(a)–(f) of the Act. While this protection is automatic for most tenancies, landlords and tenants can agree to “contract out” of these rights by following a specific legal process, which includes a statutory or simple declaration from the tenant acknowledging they understand the rights they are waiving.

Security of tenure can be especially valuable to businesses that require substantial upfront investment in fit-outs or have developed a strong presence in a specific location, such as retail stores. The ability to plan long-term without fear of displacement is a critical factor for many businesses.

Contracting Out of Security of Tenure

If a tenant agrees to contract out of Sections 24–28 of the Landlord and Tenant Act 1954, they give up several key legal protections. Specifically, the tenant will have:

• No legal right to remain in the property after the lease term ends.
• No right to stay in occupation unless the landlord voluntarily offers a new lease.
• No right to compensation from the landlord upon vacating the premises.
• No ability to ask the court to determine the terms or rent of a new lease if offered.

Due to the legal and commercial implications of contracting out, tenants are strongly advised to seek professional advice before entering into a lease agreement. Understanding these rights and risks ensures that your business can make informed decisions and protect its future operations.

For further advice and assistance, please contact our Commercial Property team on 01604 828282 or email them at
info@franklins-sols.co.uk.