DTM Legal’s Commercial Property Team takes a look at some of the lease clauses that can leave tenants most vulnerable.
Landlord v tenant – the imbalance
For most businesses, commercial premises represent a major investment—and potentially, a major liability. Without a full understanding of lease terms, tenants may find themselves bound by restrictive obligations that hamper business growth, reduce profitability, and increase the risk of disputes.
A commercial lease is the product of negotiation, but the balance of power often favours the landlord. This imbalance can leave tenants at a disadvantage, particularly if they are not legally advised or are unaware of standard market positions.
Legal Costs – Who Pays?
One common clause that reflects this imbalance is the requirement for the tenant to cover the legal costs of both parties. This is rarely justified and should be challenged from the outset. When submitting an offer to lease premises, tenants should clearly state that each party will bear their own legal costs.
Lease Term and Termination
Landlords typically prefer long lease terms, offering stability and maximising commercial value, particularly when looking to sell or refinance. While a longer term can provide tenants with operational certainty and help justify initial costs, it also comes with risk—especially in an unpredictable business environment.
As Sir James Dyson once said:
“Nobody wants the expenditure of a lease on a factory which lasts 21 years. You can’t plan 21 years ahead.”
To introduce flexibility, tenants often seek break clauses, allowing them to terminate the lease early—usually with at least six months’ notice. However, the devil is in the detail.
A valid break clause may require tenants to:
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Pay all rent due, including sums paid in advance. This can be problematic if the break date doesn’t align with the rent payment cycle.
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Ensure full compliance with lease obligations. Even minor breaches (e.g., repair, redecoration) may invalidate the break.
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Deliver vacant possession. The property must be free from all occupiers, furniture, and alterations, and may need to be reinstated to its original condition.
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Serve the break notice correctly, following all procedural requirements strictly as set out in the lease.
Failure to meet any of these conditions could render the break ineffective—leaving the tenant locked into the lease.
Rent Review – Know What You’re Agreeing To
Rent review clauses can significantly impact future costs. Most long-term leases include reviews every 3–5 years, often upward-only. These are designed to ensure rent reflects market conditions but can sometimes result in disproportionate increases.
There are various mechanisms:
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Open market rent review: Rent is adjusted to reflect current market value.
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Turnover rent: Rent is linked to the tenant’s revenue.
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Stepped rent: Pre-agreed incremental increases, even in the absence of a formal review clause.
The structure and frequency of rent reviews should be negotiated carefully to avoid future surprises. Make sure any increases are justifiable and proportionate to your business’s use of the premises.
Repairing Obligations – A Costly Trap
Repairing obligations are one of the most litigated issues in commercial property. Landlords often try to impose extensive responsibilities on tenants, and unless carefully limited, these can result in unexpected costs—especially at lease end.
Watch out for phrases like:
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“To keep the property in good repair and condition” – This implies the property is already in good repair, potentially requiring the tenant to upgrade its condition.
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“To keep in good condition” – This may include obligations to improve the property, even if no disrepair exists.
To limit exposure, tenants should negotiate to include a Schedule of Condition. This document records the state of the premises at the outset and restricts the tenant’s obligations to maintaining that existing condition.
Also, ensure your liability doesn’t extend beyond the defined premises. It may sound obvious, but leases can sometimes include shared structures or areas not intended to be the tenant’s responsibility.
Final Thoughts
A commercial lease should be a roadmap for the landlord–tenant relationship—not a source of friction. With clear communication, thoughtful negotiation, and the right legal advice, both parties can achieve an agreement that supports their goals.
If you’re considering entering into a commercial lease or renegotiating an existing one, DTM Legal’s Commercial Property Team can help you identify and mitigate risks—so you can focus on what matters most: growing your business.
For advice on Commercial Property Leases please contact Anna Duffy, Head of Commercial Property at anna.duffy@dtmlegal.com
