What is the Landlord and Tenant Act 1954 and how does it affect my lease?

Part II of the Landlord and Tenant Act 1954 gives qualifying business tenants 'security of tenure' — the right to renew their lease at the end of the term at a market rent, unless the landlord can establish one of the statutory grounds for refusal (such as wanting to redevelop the premises or occupy them personally). The parties can agree to 'contract out' of these provisions, which means the tenant gives up their renewal rights.

What does 'contracted out' mean?

A lease that is 'contracted out' of the Landlord and Tenant Act 1954 means the tenant has no automatic right to renew at the end of the term. The landlord must serve a warning notice on the tenant before the lease is completed, and the tenant must sign a declaration (or statutory declaration if less than 14 days' notice is given) confirming they understand the consequences.

What is the difference between FRI and IRI leases?

A Full Repairing and Insuring (FRI) lease makes the tenant responsible for all repairs to the premises, including the structure, exterior and interior, as well as insuring the premises. An Internal Repairing Only (IRI) lease makes the tenant responsible for internal repairs only, while the landlord remains responsible for the structure and exterior. FRI leases are common for whole buildings; IRI leases are typical for units within a larger building.

Do I need to pay Stamp Duty Land Tax on a commercial lease?

SDLT may be payable on the grant of a commercial lease. It is calculated on both the lease premium (if any) and the net present value (NPV) of the total rent over the lease term. The current threshold for SDLT on the NPV of rent is £150,000. You should take professional advice or use HMRC's online calculator to determine the amount payable.

Can I assign or sublet my commercial lease?

This depends on the terms of your lease. Most commercial leases either prohibit assignment and subletting entirely or permit them with the landlord's prior written consent (which must not be unreasonably withheld). Under the Landlord and Tenant Act 1927 Section 19, where consent is required, it cannot be unreasonably refused. The Landlord and Tenant (Covenants) Act 1995 allows conditions to be imposed.

What happens if I want to change the use of the premises?

You will need to check three things: (1) does the lease permit the new use? If not, you will need the landlord's consent; (2) does the new use fall within the same planning use class? The 2020 Use Classes Order merged many commercial uses into a new Class E; (3) do you need planning permission for the change? You may also need to comply with building regulations depending on the nature of the change.

Commercial Lease Agreement (Business Premises)

A commercial lease agreement governs the letting of business premises such as offices, shops, warehouses, workshops and industrial units.

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Landlord Details

Landlord / Freeholder Name*

Landlord Registered / Correspondence Address*

Landlord Company Number (if applicable)

Landlord Email

Tenant Details

Tenant / Company Name*

Tenant Registered / Correspondence Address*

Tenant Company Number (if applicable)

Tenant Email

Property Details

Premises Address*

Description of Premises*

Permitted Use*

Reference the Town and Country Planning (Use Classes) Order 1987 as amended

Terms

Annual Rent (£)*

Rent Payment Frequency*

Lease Start Date*

Lease Term (years)*

Include rent review provisions

Rent review every (years)

Rent Review Type

Service charge payable

Additional Clauses

Repair Obligation*

Include break clause

Contracted out of the Landlord and Tenant Act 1954

Assignment / Subletting*

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COMMERCIAL LEASE AGREEMENT --- DATE: [leaseStartDate] PARTIES 1. LANDLORD Name: [landlordName] Address: [landlordAddress] 2.3 This Lease is not contracted out of the Landlord and Tenant Act 1954 Part II. The Tenant has the statutory right to apply for a new tenancy at the end of the Term in accordance with Sections 24-28 of the 1954 Act, unless the Landlord establishes one of the grounds for opposition in Section 30. 3. RENT 3.1 The Tenant shall pay the Rent of £[annualRent] per annum, payable [rentPaymentFrequency]5[else]4. TENANT'S COVENANTS The Tenant covenants with the Landlord: (a) To pay the Rent and any service charge on the due dates; (b) To use the Premises only for the Permitted Use and not for any illegal or immoral purpose; (c) To comply with all applicable statutes, regulations, planning permissions and bye-laws relating to the Premises and the Tenant's use thereof;6[else]5. LANDLORD'S COVENANTS The Landlord covenants with the Tenant: (a) That the Tenant, paying the Rent and performing the Tenant's covenants, shall peaceably hold and enjoy the Premises without interruption by the Landlord; (b) To insure the building against fire and other usual risks (unless the Tenant has a full repairing and insuring obligation); (c) To maintain the structure and exterior of the building (where the repair obligation is internal repairing only); (d) To provide the services referred to in the service charge provisions (if applicable). 7[else]6. ALIENATION [alienation]8[else]7. BREAK CLAUSE Either party may terminate this Lease on or after the [breakClauseDate]-year anniversary of the Term commencement date by giving the other party at least [breakClauseNotice] months' prior written notice. The break is conditional upon: (a) the Tenant having paid all rent and other sums due under this Lease; (b) the Tenant having given vacant possession of the Premises; (c) the Tenant not being in material breach of any covenant in this Lease.{{/if}} 9[else]8[else]8[else]7{{/if}}. GENERAL PROVISIONS (a) This Lease is governed by the laws of England and Wales. (b) Any notice under this Lease must be in writing and served in accordance with Section 196 of the Law of Property Act 1925. (c) The Landlord and Tenant (Covenants) Act 1995 applies to this Lease. (d) If any provision of this Lease is found to be unenforceable, the remaining provisions shall remain in full force. (e) This Lease constitutes the entire agreement between the parties. --- EXECUTED as a DEED by the LANDLORD: Signature: ________________________ Name: [landlordName] Date: ________________________ Witness signature: ________________________ Witness name: ________________________ EXECUTED as a DEED by the TENANT: Signature: ________________________ Name: [tenantName] Date: ________________________ Witness signature: ________________________ Witness name: ________________________

Important Notes

Legal Disclaimer

Commercial leases in England and Wales are governed by the Landlord and Tenant Act 1954 Part II (security of tenure for business tenants), the Landlord and Tenant (Covenants) Act 1995 (liability after assignment), and the Law of Property Act 1925. If the lease is to be contracted out of the 1954 Act, the procedure in Schedule 1 to the Regulatory Reform (Business Tenancies) (England and Wales) Order 2003 must be followed. A lease for a term exceeding seven years must be registered at the Land Registry. Stamp Duty Land Tax (SDLT) may be payable on the grant of a commercial lease. The Use Classes Order 1987 (as amended 2020) governs permitted uses. VAT may apply to commercial rent if the landlord has opted to tax. Both parties are strongly advised to seek independent legal and professional advice before entering into a commercial lease. This template is provided as a starting point only and does not constitute legal advice.

This template is provided for informational purposes only and does not constitute legal advice. For complex legal matters, we recommend consulting a qualified solicitor.

Frequently Asked Questions

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