A commercial lease is an agreement to let a property or part of it for business purposes. There are key responsibilities and rights for both parties. A Section 26 Form is used to request a new commercial lease or end a tenancy. It includes a warning notice explaining the rights that are being given up.
Gross lease
A gross lease is a commercial lease where the tenant pays a single flat fee that includes all property costs. These typically include rent, utilities, and maintenance. This differs from net leases where the landlord is responsible for paying some or all of those extra costs.
While gross leases aren’t as common as net or NNN leases, they can offer a cost-effective solution for tenants with limited budgets and for those who are new to commercial real estate. Often, these leases come with terms that allow for annual rent increases to help tenants keep up with increasing costs.
There are several types of commercial leases, and choosing the right one will depend on your business goals, growth trajectory, requirements, and more. It’s important to understand the differences between these leases before you sign any contracts.
The most common types of commercial leases in the UK include FRI and NNN leases, as well as modified gross leases. These are all designed to give businesses more flexibility while still requiring them to pay certain costs, such as insurance and property taxes.
A FRI or NNN lease will require the tenant to pay a percentage of the overall building costs, as well as a percentage of any ancillary charges, such as cleaning and electricity. This type of lease is a great option for businesses that are confident in their ability to manage these expenses, as it allows them more control over their commercial space.
As an added benefit, NNN leases tend to be cheaper than other types of commercial leases. However, they can also be more risky for landlords, as they are relying on their tenants to exercise due diligence and make sure the property is being kept in good condition.
NNN leases are most commonly used for long-term office space, such as a 10-year term or more. These leases usually have more provisions for landlords, including more detailed financial reporting and requirements. They may also require the tenant to be responsible for more of the building maintenance, such as roof repairs.
For leases with a term of 7 years or more and granted on or after 19 June 2006, the Statutory Declaration Made by Tenant must be included. This document requires the tenant to declare that they have been informed of the rights they are giving up by contracting out, and they are aware of the consequences of doing so. This form is provided by LawDepot with our commercial lease form, and is signed before a solicitor or commissioner of oaths.
Regardless of which type of commercial lease you choose, the key thing to remember is that it will be governed by the Landlord and Tenant Act 1954. This means that the landlord must serve a notice to the tenant no later than 14 days before the end of the lease term, explaining what rights they are giving up by contracting out. They must also provide the tenant with a copy of any written agreements they wish to use. The tenant can then decide whether to continue with the tenancy or terminate the agreement.
