When renting commercial property in the UK, choosing the right type of commercial lease agreement is essential to ensure it aligns with your business needs. Commercial leases can vary significantly in terms of flexibility and obligations, so it’s vital to understand the different types available. Below, we explore the key types of commercial leases in the UK and outline some of their key features.
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1. Full Repairing and Insuring Lease (FRI)
A Full Repairing and Insuring (FRI) lease is one of the most common types of leases within commercial property in the UK.
Key Features:
- The tenant is responsible for the upkeep and repair of the property, as well as the cost of insuring the building.
Pros:
- Often an FRI lease will be for a longer term which provides added security for tenants.
- The tenant has control over maintenance.
Cons:
- Potentially high maintenance depending on the property.
Lawhive suggests arranging an independent survey, being clear on how the property is defined, creating a schedule of condition and negotiating repair responsibility to reduce your liability in an FRI.
2. Internal Repairing Lease
In an Internal Repairing lease, the tenant is responsible for maintaining only the interior of the property.
Key Features:
- The landlord remains responsible for the external and structural repairs.
- Maintenance costs are lower compared to an FRI lease.
Pros:
- Reduced liability for major repairs.
- More manageable maintenance costs.
Cons:
- Typically, higher rent to compensate for the landlord’s retained responsibilities.
3. Licences
Licences are not a lease, but a formal tenancy agreement designed for businesses seeking a short-term tenancy and increased flexibility.
Key Features:
- Licences are typically 1-11 months in length and will often give both the licensor (landlord) and licensee (tenant) the ability to break by giving notice.
- Maintenance responsibilities may be shared – or minimal for the tenant.
- Higher rent per square foot compared to a longer-term lease, reflecting the increased flexibility.
Pros:
- Ideal for startups or businesses with uncertain growth trajectories.
- Easier to terminate or renegotiate.
Cons:
- Higher monthly costs.
- Less security for long-term planning.
4. Tenancy at Will
Unlike a traditional commercial property lease, a tenancy at will has no set duration and continues only for as long as both parties agree. A Tenancy at Will is often used to bridge a gap while a formal lease agreement is being drawn up by solicitors and allows an earlier occupation.
Key Features:
- A Tenancy at Will does not provide any security as the agreement can be terminated
at any time by either party. - The agreement is often simple, with minimal legal formalities, making it quicker and
easier to have drawn up than a formal lease agreement.
Pros:
- Flexibility for both parties.
- Quick to set up with minimal legal documentation.
Cons:
- Lack of security.
- The agreement often lacks detailed provisions and responsibilities.
Choosing the Tenancy Agreement for Your Business
When selecting a tenancy agreement, consider:
- Long-term leases offer stability, while short-term options provide flexibility.
- Factor in repair responsibilities and insurance costs.
- Consider whether your chosen lease allows room for expansion or relocation.
Consulting with a property solicitor or chartered surveyor is recommended to ensure you fully understand your obligations and negotiate favourable terms.
By understanding these types of commercial leases and their nuances, you can make informed decisions that align with your operational needs and financial goals. Read more about our Commercial Agency services here or get in touch with our property experts today on 01782 202294.
