commercial lease

Commercial Lease – Agreeing Heads of Terms

Signing a commercial lease marks a major financial decision for any business. That’s why it’s vital to thoroughly evaluate both the property and the terms of occupancy before making a commitment. Grasping the heads of terms, which set the groundwork for the agreement between the landlord and tenant before the lease is fully executed, is crucial. It’s advisable to consult with a property lawyer from the outset, as renegotiating heads of terms can pose difficulties.

Key considerations within the heads of terms include:

  The Term: 

  • Weigh the benefits of a shorter lease against the potential costs of relocating. 
  • Longer commercial leases may strengthen business goodwill but may trigger additional costs like Stamp Duty Land Tax and registration fees. 

  The Rent: 

  • Clarify financial liabilities under the lease in the heads of terms. 
  • Specify annual rent, VAT applicability, insurance costs, service charges, utility costs, and business rates. 
  • Understand how rent reviews during the lease term will be conducted.


    • Define the tenant’s ability to assign, sublet, or charge the lease during the term. 
    • Landlord consent may be conditional on factors such as a rent deposit or guarantor for the assignee. 

 Break Clauses: 

  • Carefully consider conditions for ending the commercial lease early. 
  • Ensure break clause provisions are reasonable and not excessively burdensome. 


  • Be aware of insurance obligations, whether reimbursing a proportionate cost or assuming full repair and insuring costs. 


  • Clarify responsibility for repairs, especially in shorter leases. 
  • Longer leases typically involve tenant liability for repairs and periodic decoration. 

  Guarantee/Rent Deposit: 

  • Consider entering the lease as a limited company to limit personal liability. 
  • Negotiate a rent deposit as an alternative to a personal guarantee. 

In summary, a comprehensive understanding of these key terms is crucial when searching for commercial property. Seeking legal assistance from the outset is advisable to negotiate favourable heads of terms before the lease is prepared by the landlord’s solicitor.

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