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how to draft a commercial lease agreement uk

How to Draft a Commercial Lease Agreement in the UK

If you need to know how to draft a commercial lease agreement in the UK, you are dealing with one of the more consequential documents a business will sign. Get it wrong and you could be locked into unfavourable rent review terms, liable for dilapidations you did not expect, or unable to exit without a penalty. A commercial lease in the UK is governed primarily by the Landlord and Tenant Act 1954, which gives business tenants statutory rights to renew their lease unless those rights are explicitly contracted out. That single point alone changes the entire structure of the document. This guide walks through every clause you need to include, what each one does, and where the common mistakes happen. It is written for founders, operations leads, and anyone who needs to understand what they are signing or issuing — not for lawyers. Where a solicitor is genuinely necessary, this guide will tell you that plainly.

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Why this matters

Most founders either use a template they found online without understanding what it covers, or they pay a solicitor for a full bespoke draft when a well-structured standard form would have done the job. Both approaches carry real risk. A commercial lease is not a short-term commitment — five, ten, or fifteen year terms are common — and clauses around rent review, break rights, repair obligations, and security of tenure can have six-figure financial consequences. The problem is not that founders are careless. It is that commercial lease drafting guidance in the UK is either too technical to be useful or too vague to be actionable. This page fixes that.

The Atornee approach

Atornee lets you generate a structured commercial lease agreement built around UK law, with the key clauses pre-populated and flagged for your review. You are not getting a generic template from a US legal platform. You are getting a document that accounts for the Landlord and Tenant Act 1954, standard RICS lease code recommendations, and the practical realities of UK commercial property. You can review the output clause by clause, understand what each section does, and decide where you need a solicitor to step in. For straightforward lettings between informed parties, Atornee gets you to a solid first draft fast. For complex multi-site or high-value leases, it gives you a strong starting point before instructing a solicitor.

What you get

A complete commercial lease agreement structure covering all core UK clauses — parties, premises, term, rent, repair, and break rights
Plain-English explanations of what each clause means and where your exposure sits
Landlord and Tenant Act 1954 security of tenure language, including contracted-out lease wording where applicable
Rent review and service charge provisions drafted to reflect standard UK commercial practice
A checklist of what to verify before signing or issuing the lease, including title, planning use class, and EPC requirements

Before you sign checklist

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1. Confirm the property's planning use class under the Town and Country Planning (Use Classes) Order 1987 — your permitted use clause must align with this
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2. Decide whether the lease will be contracted out of the Landlord and Tenant Act 1954 security of tenure provisions and follow the correct statutory notice procedure if so
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3. Agree heads of terms in writing before drafting the lease — this prevents scope creep and protects both parties during negotiation
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4. Clarify the repair standard: full repairing and insuring (FRI) leases place the entire repair burden on the tenant, which is standard but must be understood upfront
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5. Draft or review the rent review clause carefully — upward-only open market reviews are common but not the only option, and the mechanism matters
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6. Include a break clause if either party may need to exit early, and ensure the conditions for exercising it are clearly defined and realistic
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7. Check EPC compliance — commercial properties in England and Wales must meet minimum energy efficiency standards before being let

FAQ

Does a commercial lease in the UK need to be in writing?

Yes. A commercial lease for a term of more than three years must be made by deed under the Law of Property Act 1925. This means it must be in writing, signed, witnessed, and delivered. Leases of three years or less can be created informally but putting them in writing is always advisable to avoid disputes.

What is the Landlord and Tenant Act 1954 and does it apply to my lease?

The Landlord and Tenant Act 1954 gives business tenants in England and Wales the right to renew their lease at the end of the term on similar terms. This applies automatically unless both parties agree to contract out of it before the lease is granted, following a specific statutory notice and declaration procedure. If you are a landlord who wants the property back at the end of the term, contracting out is essential. If you are a tenant, think carefully before agreeing to it.

What is a full repairing and insuring lease?

An FRI lease places responsibility for all repairs and building insurance on the tenant, even if the property was not in perfect condition when the lease started. This is the standard structure for commercial leases in the UK, particularly for whole-building lettings. Tenants should always get a schedule of condition prepared at the start of the lease to limit their dilapidations liability at the end.

Can I use a template for a commercial lease agreement in the UK?

A template is a reasonable starting point for straightforward lettings, but commercial leases are not one-size-fits-all documents. The term length, rent review mechanism, break rights, permitted use, and repair obligations all need to reflect the specific deal. Using a template without understanding what each clause does — or without adapting it to your situation — is where most problems start. For high-value or long-term leases, instruct a solicitor.

What should heads of terms include before drafting a commercial lease?

Heads of terms should cover: the parties, the property address, the proposed term, the annual rent and review mechanism, whether the lease is contracted in or out of the 1954 Act, any rent-free period, repair obligations, permitted use, break clause details if applicable, and who pays legal costs. Heads of terms are not legally binding in most cases, but they set the framework for the lease and prevent misunderstandings during drafting.

When do I actually need a solicitor for a commercial lease?

You should instruct a solicitor if the lease term is five years or more, the annual rent is significant, the property involves complex title issues or shared services, you are contracting out of the 1954 Act, or you are negotiating a lease for a multi-site operation. For shorter, lower-value lettings between informed parties, a well-drafted template reviewed carefully by both sides can work — but both parties should at minimum understand what they are agreeing to.

Related Atornee Guides

Cheap Contract Solicitor Alternative (UK)

Useful if you want to understand when Atornee replaces a solicitor and when it does not, across your broader contract workflow.

Cheap Solicitor for NDA (UK)

If your commercial lease involves sharing sensitive business information during negotiations, pairing it with an NDA is worth considering.

Atornee Use Cases

See how UK founders and operations teams use Atornee across different document types and business stages.

External References

GOV.UK Business and Self-employed

Official UK government guidance on business premises, planning, and commercial property obligations.

UK Legislation

Primary source for the Landlord and Tenant Act 1954, Law of Property Act 1925, and other statutes governing commercial leases in the UK.

ICO Guidance for Organisations

Relevant where commercial leases involve data sharing between landlord and tenant, particularly in managed or serviced office arrangements.

Trust & Verification Policy

Authored By

A

Atornee Editorial Team

UK Commercial Property Legal Content

Reviewed By

C

Compliance Review Desk

UK Business Legal Content QA

Last reviewed on 3/4/2026

"This content is based on analysis of standard UK commercial lease structures, RICS lease code guidance, and the statutory framework under the Landlord and Tenant Act 1954 and Law of Property Act 1925. It reflects the practical questions UK founders and operations leads ask when drafting or reviewing commercial leases for the first time."

References & Sources