Lease

Also called Commercial lease, Business tenancy

A long commitment to pay for space, usually the second-biggest fixed cost and the hardest one to get out of.

What it means

A commercial lease grants the right to occupy premises for a term, in exchange for rent and obligations about repair, use, insurance and alterations.

Business tenancies may have security of tenure under the Landlord and Tenant Act 1954, giving a right to renew — unless that protection has been formally excluded, which is common and requires a specific procedure.

Why it matters

A five-year lease at £30,000 a year is a £150,000 commitment, frequently signed with less scrutiny than a £5,000 equipment purchase.

Repairing obligations are where the money actually goes. A full repairing and insuring lease can leave you liable to hand back the building in better condition than you found it.

What it looks like in practice

Negotiate before signing: a break clause and its conditions, whether the rent review is upward-only, a schedule of condition to cap repair liability, rent-free period, and whether you can assign or sublet.

Break clauses are strict. Conditions such as "vacant possession" and "all rent paid" have defeated tenants on technicalities.

Check whether the lease is inside or outside the 1954 Act protection, and check business rates before committing.

What to watch out for

Personal guarantees and rent deposits, which landlords routinely require from small companies.

Dilapidations at the end of the term. Budget for them from the start; they arrive as a bill at the worst moment.

Service charges in multi-let buildings, which are often uncapped.

Where to get proper advice

A commercial property solicitor, and for anything substantial a chartered surveyor to negotiate terms before the lawyers start.