With over 23 years of experience finding office space across London and the UK, we’ve been asked a hefty number of questions relating to leases when renting office space.
We’ve put together a list of the most common questions we get asked to help you navigate office leases. The article serves as a guide, and we would strongly urge you to check your rights with a solicitor before you enter into an agreement.
General Office Lease Questions
What is an office lease?
An office lease is a legal agreement between a landlord and a tenant which gives the tenant the right to occupy the space for a fixed period in exchange for rent.
How is an office lease different from a licence?
A licence is an agreement that allows a tenant to use the office space on a short-term or flexible basis. However, a lease gives the tenant more rights and control over the space, such as making structural changes or subletting the space. Licences are common in serviced offices and coworking spaces.
What is typically outlined in an office lease agreement?
We have found that most leases will specify the rent amount, length of term, permitted use, repair obligations and break clause terms.
Are business rates included in the lease?
No. For leased spaces, business rates are paid directly to the council. However, serviced offices include business rates in the all-inclusive amount. Business rates can be a complex topic, so we’ve also compiled our own in-depth guide to business rates.
Do I need to pay VAT on office rent?
Yes, you do need to pay VAT on office rent. It is important to note that for a leased space, the rent price includes VAT, however, with a serviced office, the price excludes VAT. Some buildings are exempt from VAT, but they are rare.
What is a Full Repairing and Insuring (FRI) lease?
A Full Repairing and Insuring (FRI) lease means that the tenant takes full responsibility for all repairs and insurance, even if they didn’t cause the damage.
What is a rent review clause, and how often does it occur?
A rent review clause allows landlords to adjust the rent in line with current market conditions. We usually see rent reviews for leased spaces every 3 to 5 years. In a serviced office, rent reviews are rare as pricing is usually fixed for the duration of the agreement.
Is a deposit required for an office lease?
Yes. In short, for serviced offices, the deposit is usually the equivalent of 2 to 3 months’ rent and for a traditional leased space, this can be the equivalent of 3 to 6 months’ rent. If you’re looking for more details about the typical deposits for office spaces, we have written a detailed article to dig deeper.
What is a service charge, and how is it calculated in office leases?
A service charge is a fee that tenants pay towards the maintenance of communal spaces such as lifts and reception areas. Landlords we work with usually calculate this based on the size of the office space and the services provided, such as a managed reception or 24/7 security.
What is a schedule of condition, and should I get one before signing a lease?
A schedule of condition documents the state of the property before moving in. We would always recommend getting a schedule of condition before signing a lease, as it helps avoid disputes at the end of the term.
What are dilapidations, and will I be liable at the end of the lease?
Dilapidations are the costs you will need to pay to return the office to its original condition and format before you took occupation. We have found that in most leases, tenants are liable for these costs. However, it is always important to check your lease.
Lease Length, Flexibility & Termination
How long is a typical office lease in London and the UK?
Leases for office space in London and the UK can start from a monthly rolling contract and go up to 15+ years. Serviced offices offer the shortest contracts (monthly rolling), while traditional leased spaces offer the longest term.
We have explored and analysed the typical length of office space leases, including coworking, serviced, managed and traditional leases.
What is a break clause?
A break clause allows either party to end the lease early, usually within 3 to 6 months. We would recommend negotiating a break clause to ensure flexibility in longer contracts.
Can I negotiate the rent and terms of an office lease?
Yes. In our experience, rent, lease length, and break clauses are negotiable, and we would always suggest negotiating for a better deal.
Are there flexible lease options for small businesses and start-ups?
Yes. Serviced offices are perfect for small businesses and start-ups as they offer flexible contracts and all-inclusive pricing.
What notice period is required to terminate a lease?
We usually see notice periods of anything from 3 to 12 months required. However, it is important to check your contract, especially any break clauses.
Can I exit an office lease early without penalty?
No, unless it states otherwise. But if there is a break clause or the landlord allows an “early surrender”, you may be able to negotiate a lower penalty.
If you did exit early without mutual agreement, you would normally be liable to pay rent for the remaining time on the lease.
What happens if I miss a rent payment in a leased office?
You could face interest charges or, in some cases, legal action. In our experience, we recommend speaking to your landlord directly if any financial issues occur.
Legal, Financial & Practical Responsibilities
Do I need legal advice before signing an office lease?
Yes. We strongly recommend getting legal advice to protect you from oversights that could result in unexpected costs.
What should I check before signing a lease?
We advise checking the length of the lease, break clauses, rent reviews, repair obligations and whether customisations are permitted.
What responsibilities do I have as a tenant in an office lease?
Tenants are responsible for ensuring rent is paid on time, keeping the office in good condition, and complying with lease terms. In some cases, you are also responsible for health and safety within the workspace.
Who is responsible for maintenance and repairs in a leased office?
In an FRI lease, tenants are responsible for maintenance and repairs, but in a serviced office or coworking space, repairs are the provider's responsibility.
Can I sublet my office space to another company?
This depends on the terms of the lease. Some leases may allow you to sublet with the consent of the landlord. Serviced offices do not allow you to sublet the space, as it is a licence agreement rather than a lease.
Can I share my leased office with another company?
This is also dependent on the terms of the lease. However, we’re finding that more companies are obtaining permission to share office spaces due to the rise of remote working.
Can I make structural changes to a leased office space, and do I need the landlord’s consent?
Yes, you can make structural changes in a leased office, and you will need the landlord’s consent. It is crucial that any structural changes also comply with building regulations and local laws.
Can I change the layout or fit-out of the leased office?
Yes, you can customise the layout and fit-out of the office. Some landlords may require fit-out plans to be submitted in advance.
What insurance do I need when leasing an office?
Tenants renting office space usually need public liability and contents insurance. Building insurance should be covered by the landlord.
What happens if the landlord or tenant breaches the lease?
The non-breaching party may seek damages or the termination of the lease.
What happens if my landlord sells the building during my lease?
Your lease will continue under the new owner. Terms are usually still binding until the lease expires or is renewed.
Trying to understand office leases can be very overwhelming. In our experience helping businesses find office space, we have seen how the right guidance can make the process easier. Whether renting office space for the first time or renegotiating terms, clear answers can ensure you make the right decision.
