Renting Premises

3. Taking a Lease

A lease is a more complex and long-term commitment than a licence.

3.1 How long is the period of the lease?

• Leases can last for any period from one to 25 years or more.
• Some businesses prefer the flexibility of a short lease (eg three years). But these can be more difficult to obtain.

3.2 Is there a break clause?

This is an option for you (or the landlord) to terminate the lease early.

• How much notice do you have to give?
• Do you have to comply with any conditions to operate the break?The landlord may be legally entitled to refuse to accept the break if you breach any terms of the lease, however minor.

3.3 Do you have the right to sub-let the premises, or to assign the lease? (See 4 and 5.)

• This offers another exit route although complex VAT rules should be explored.

3.4 When are the rent review dates?

See Rent reviews and rating assessments.

• Is the review based on an open market rent, changes in the Retail Price Index, or any other method?
• What happens if you cannot agree? Can an independent expert or arbitrator be brought in to determine the new rent?
• Can the rent go down, as well as up?
• If the next rent review date is soon, can you negotiate the future rent now?

3.5 Are you required to provide a personal guarantee?

• Avoid these. Otherwise, if your business fails, you will be liable for the rent - and for other payments due under the lease - for the rest of the lease period.

3.6 Are you required to pay a deposit?

• When will it be repaid, and will you receive interest on it?
• Under what circumstances could the landlord keep all or part of it?

3.7 What will happen when the lease expires?

• Check whether the lease is covered by the Landlord and Tenant Act 1954, as this helps protect your rights when renewing your lease at the end of the term.
• The Act gives you a general legal right to renew the lease, unless you have breached the existing contract. The main exceptions are if the landlord wants to sell, redevelop or move in.