How to secure your premises with a lease

Get a solicitor before you do anything else

Securing a lease is the single most important legal step in getting your physical premises, and you must use a specialist commercial property solicitor. A lease is a long, complex, and expensive legal contract. Trying to save money by not getting proper legal advice is a false economy that could easily destroy your business with hidden costs and unfair clauses. Your solicitor’s job is to protect you, negotiate on your behalf, and ensure the agreement you sign is fair and fit for purpose.

The process of securing a lease

While it can seem daunting, the process follows a logical path. Your solicitor will guide you through every stage, but it helps to understand the key milestones.

1. Heads of Terms (HoT): Once you’ve agreed a deal in principle with the landlord or their agent, they will issue a document called the Heads of Terms. This is a summary of the main points of the deal, such as the rent, the length of the lease, and any rent-free period. While not usually legally binding, it’s a crucial document as it sets the tone for the entire negotiation.
2. Due Diligence: The landlord's solicitor will draft the full lease and send it to your solicitor. Your solicitor will then review it, conduct legal searches (e.g., with the local council), and raise enquiries to ensure there are no hidden problems with the property.
3. Negotiation: This is where your solicitor earns their fee. They will negotiate the detailed clauses of the draft lease with the landlord’s solicitor, aiming to make the terms more favourable and less risky for you.
4. Signing (or 'Completion'): Once the lease is agreed, you will sign the final version. At this point, you will typically pay the first quarter's rent, a rental deposit, and your solicitor's fees. The lease is now legally binding, and you can pick up the keys.

Key lease terms you need to understand

A commercial lease is full of jargon. Here are the most important clauses your solicitor will be focusing on:

• Term: This is the official length of the lease, for example, 5 or 10 years. It's important to understand your rights under the Landlord and Tenant Act 1954, which can often give you a right to renew the lease when it ends.
• Rent and Rent Reviews: The lease will state the annual rent and when it must be paid (usually quarterly in advance). Crucially, it will also detail how and when the rent can be increased. This could be linked to inflation (RPI) or reviewed to the 'open market' value, so you need to be clear on how much your rent could go up in the future.
• Break Clause: This is one of the most important clauses for a new business. A break clause gives you the right to end the lease early on a specific date, for example, after the third year of a five-year term. This provides a vital escape route if the business doesn’t work out as planned.
• Repairing Obligations: This is a major trap for the unwary. Most commercial leases are 'Full Repairing and Insuring' (FRI), which means the tenant is responsible for all repairs, including the structure of the building. This could land you with a huge bill for things like roof repairs.
• Use: The lease will strictly define what you are allowed to use the premises for (e.g., 'as a coffee shop and for the sale of cold food'). It’s vital this is broad enough to cover everything you want to do.
• Alterations: This clause details what changes you are allowed to make to the property. It usually distinguishes between structural changes (often forbidden) and non-structural cosmetic changes (often allowed with the landlord's consent).
• Alienation: A strange word that simply covers your rights to sell (assign) or sub-let the lease to someone else if you want to move on before the lease term ends. Landlords will almost always want control over who can take over the lease.

Top Tip: Before signing an FRI lease, you must get a professional building survey done. To protect yourself further, ask your solicitor to attach a 'Schedule of Condition' to the lease. This is a photographic and written record of the property's condition when you move in, limiting your repair obligation to keeping it in that same state, rather than making it perfect.

What happens after you sign?

Once the lease is signed, your solicitor will deal with the final administrative steps. This includes calculating and paying any Stamp Duty Land Tax (SDLT) that might be due to HMRC. If your lease is for a term of more than seven years, they will also register it with the Land Registry. Securing your lease is a huge milestone. With expert advice, you can sign with confidence, knowing you have a secure and fair foundation for your business's new home.