Last reviewed 29 August 2026
Taking premises feels like a milestone. It is also a long-term liability that binds the company through market cycles, headcount changes and, occasionally, an entire pivot. Unlike most commercial contracts, a lease cannot simply be terminated for convenience.
The commercial terms are negotiated at heads of terms stage, before solicitors are usually involved. That is the point at which rent-free periods, break rights, repair obligations and tenure are actually decided, so early advice pays for itself.
This guide covers the provisions that most affect a growing business in Oxfordshire, the Thames Valley and beyond, and the questions to settle before signing.
Heads of terms: where the deal is really done
Heads of terms set out rent, term, break dates, rent-free period, service charge, repairing obligation, permitted use and whether the lease is inside or outside the Landlord and Tenant Act 1954. They are usually stated to be subject to contract and not legally binding, but in practice they frame everything that follows.
Trying to improve a term after heads are agreed is treated as reopening the deal and often fails. Get advice on the heads before signing them, not after the draft lease arrives.
Security of tenure and contracting out
Part II of the Landlord and Tenant Act 1954 gives business tenants a statutory right to renew at the end of the term, unless the parties contract out. Contracting out requires a prescribed landlord notice and a tenant declaration — a simple statutory declaration if there is at least 14 days' notice, or a statutory declaration before a solicitor if not.
Security of tenure matters if the location is central to your business: a fitted-out laboratory, a customer-facing site, or premises with expensive infrastructure. If the space is generic office accommodation you may be comfortable contracting out in exchange for better commercial terms.
Break clauses and flexibility
Break rights are the most valuable clause for a scaling business, and the most frequently lost through technicality. Conditions such as 'vacant possession' or 'compliance with all covenants' are strictly construed by the courts; a break has failed over remaining furniture and over trivial rent arrears.
Negotiate for conditions limited to payment of the principal rent up to the break date and giving up occupation. Diarise the notice period well in advance, serve in the exact manner the lease requires, and check whether rent paid in advance beyond the break date is refundable — it is not unless the lease says so.
Rent, review and other costs
Understand the total occupancy cost, not just the headline rent: service charge, insurance rent, business rates, utilities, and any contribution to a sinking fund. Ask for historic service charge accounts and consider a cap on increases.
Rent review is usually upward-only to open market rent at fixed intervals, though index-linked reviews are increasingly common. Check the assumptions and disregards in the review clause, and make sure any tenant fit-out is disregarded so you are not paying rent on your own improvements.
Repair, alterations and dilapidations
A full repairing and insuring lease puts the whole burden on the tenant, potentially requiring you to hand back premises in better condition than you found them. Where the building is not new, negotiate a schedule of condition annexed to the lease limiting your obligation to the recorded state.
Alterations usually require landlord consent, which for non-structural internal works should be stated not to be unreasonably withheld. Plan for dilapidations: the landlord's end-of-term claim for disrepair and reinstatement is frequently the largest unexpected cost of leaving premises.
Assignment, subletting and guarantees
If growth might mean moving before the term ends, the alienation clause matters. Look for the ability to assign the whole with consent not unreasonably withheld, and the ability to sublet — ideally the whole and part, though whole-only is common.
Landlords often ask for a rent deposit or a personal or parent-company guarantee from a young business. Negotiate a mechanism for releasing the deposit or guarantee once the company meets defined financial criteria, rather than accepting an open-ended commitment for the full term.
Key points
- The deal is decided at heads of terms — take advice before signing them.
- Security of tenure under the 1954 Act must be excluded by prescribed notice and declaration.
- Break conditions are strictly construed; keep them to rent and vacant occupation.
- Budget the total occupancy cost, including service charge and rates.
- Annex a schedule of condition to limit repairing liability in older buildings.
- Negotiate release criteria for rent deposits and personal guarantees.
Frequently asked questions
- What does 'contracted out' mean?
- It means the parties have excluded the tenant's statutory right to renew under the Landlord and Tenant Act 1954, so the lease simply ends on the expiry date with no automatic right to a new one.
- Can I get out of a lease early?
- Only if there is a break clause, if the landlord agrees a surrender, or if you can assign or sublet. Each route has cost implications, and assignment may leave you liable under an authorised guarantee agreement.
- What are dilapidations?
- The landlord's claim at the end of the term for breaches of repair, decoration and reinstatement obligations. Claims are often substantial, so it is worth obtaining a surveyor's estimate before the term ends and provisioning for it.
- Is a licence better than a lease for a small business?
- A licence to occupy or serviced office agreement gives flexibility but no security and typically higher cost per square foot. For short-term or fast-changing requirements it can be the right answer; for a long-term base a lease is usually better value.