Its terms must be careful reviewed and understood before final Heads of Terms are finalised and signed.

Commercial leases are usually drafted in the landlord’s favour, so if the tenant fails to understand their responsibilities under the lease, and the long term implications, problems are almost inevitable.

Problem clauses

Several common clauses often pose particular problems for tenants, and can lead to costly disputes. There are also risks to be aware of if the draft lease is based on precedents or templates that are out of date or contain errors that have been overlooked.

Security of tenure - Tenants have security of tenure after the lease term expires under a term implied into the lease under the Landlord and Tenant Act 1954. The parties can agree to expressly contract out, but the issue can be missed if security of tenure is not the parties’ intentions.

Repairing obligations – It’s not uncommon for tenants to find out (too late) that they are subject to a Full Repairing and Insuring lease, believing they were only responsible for the interior of the property. The risk is inheriting problems caused by the previous occupant, and that could include major structural repairs. Careful negotiation can result in modified repairing clauses in favour of the tenant.

Rent review– Rent reviews must be drafted clearly and unambiguously. A rent review clause that is ambiguous or unworkable in practice can lead to an expensive dispute. The case of Monsolar IQ Limited v Woden Park Ltd is a particularly useful example.

The rent review clause in a lease for a term of 25.5 years included an indexation clause. If the clause as drafted was literally applied, the annual rent would reach more than £76m in the 25th year. The Court of Appeal agreed with the lower court that this was a drafting mistake leading to an irrational result and would be upheld.

Break clauses – Break clauses requiring conditions beyond rent arrears could make it significantly more difficult for the tenant to forfeit the lease. The conditions of a break clause should always be checked and negotiated to enable certainty.

Assignment of the lease – The lease may be drafted strictly, limiting the circumstances in which the tenant can assign the lease or sublet it, which can be a problem if the tenant’s business changes and evolves in future and new premises are required. If flexibility is likely to be needed in future, negotiating the provision will be vital.

Over-reliance on precedents

Precedent leases (such as the Model Commercial Lease) and other template documents clauses are highly valuable for lawyers but represent a danger for those who overly rely on them. Last April, insurance broker firm Lockton reported that commercial property work accounts for around 30% of all professional negligence notifications and half of all damages payments, singling out the use of precedents.

Lockton added that where precedents contain errors, there could be notifications containing multiple properties – “a hornet’s nest type notification”. Precedent leases are a useful starting point, but were never intended to be ‘one-size-fits-all’. Rather, they help to narrow down the issues for which negotiations between tenant and landlord are required.

Disputes

Should a dispute arise concerning the lease, the courts generally uphold the terms unless it is clearly absurd or makes no business sense. An error in the lease could, if a client suffers financial loss as a result, could lead to a professional negligence.

We’re covering this topic and more at our LAW2026 Commercial Property conferences. Find out more about our conferences here.