The legal side of securing commercial premises in London

Securing a new space is one of those "this is really happening" moments for a business.

It's also one of the easiest places to lose time and money if you sign something you don't fully understand, or learn too late that you can't legally use the premises the way you'd hoped.

This guide is designed to help you navigate the legal side of things:

• The main types of premises you'll come across.

• The checks that matter before you commit.

• The steps to follow so you're not boxed in by costs or clauses you didn't see coming.

A quick note: this is general guidance rather than legal advice. Commercial property terms vary widely, and a solicitor's job is to tailor the detail to your situation. The aim here is to help you ask the right questions early.

What type of premises are you actually taking on?

In London, you can find everything from a flexible desk in a managed workspace to a long lease on a high street unit.

The type of premises matters because it shapes your rights, your responsibilities and how easily you can leave if your needs change.

1. A commercial lease (the most common)

A lease usually gives you a right to occupy a specific space for a set period.

In plain English, it tends to mean the premises are yours to use and the landlord can't simply move you elsewhere on a whim.

In return, you sign a contract that gives you responsibilities – some substantial – around things like repairs, insurance and how you use the property.

Leases are common when you want stability or you're investing in fitting out the space.

If you're a growing business, they can suit you well, but only if the term length, exit options and repair obligations match your needs in reality.

2. A licence to occupy (more flexible, less secure)

A licence is typically permission to use a space rather than a right to occupy it in the way a lease provides. Licences are often used for popups, short-term arrangements and some shared spaces.

The benefit is flexibility: you can often take space quickly, with less negotiation and fewer upfront legal costs.

The trade-off is that you may have fewer rights if the arrangement ends early, and you might be subject to more day-to-day control by the provider of the space.

If you're considering a licence, pay particular attention to:

• How and when it can be ended.

• What happens to any deposit you pay.

• Whether you're allowed to adapt the space to suit how you operate.

3. Serviced offices, managed workspaces and co-working

These arrangements often come with provider-friendly contracts that bundle services and set out "house rules".

Because they feel informal, businesses sometimes assume the paperwork is light-touch. In practice, these agreements can include:

• Strict exit terms.

• Automatic renewals.

• Limitations on signage and guests.

• Additional charges for meeting rooms, storage, security passes or out-of-hours access.

If the space is central to your operation, treat the contract with the same care you'd give a lease, even if it's presented as a standard form.

4. Freehold purchase (buying the building)

Buying a property can suit established businesses that want long-term control. The legal work, however, is typically more involved than leasing.

You'll need meticulous title checks, searches, enquiries and a clear understanding of any restrictions affecting the building. Financing terms, VAT treatment and tax implications can also be more complex.

If you're buying, make sure your solicitor specialises in commercial acquisitions and that you get proper input from a surveyor early on.

Before you fall in love with a space: planning permission, use and licences

A property can look ideal and still be wrong for your business if the authorised use doesn't match what you intend to do.

This is one of the most common reasons deals stall late in the process, or businesses end up delayed after signing.

Planning permission and "use class" – in plain English

Planning rules control what a property can be used for.

Many commercial uses fall under a broad category called a "use class", and the permitted use is often described in the marketing materials when the property is advertised. But you shouldn't rely on that alone.

The key point is that the premises need to have an authorised use that matches what your business does, or you need a clear route to changing it.

A change of use can sometimes be straightforward and sometimes be slow, depending on the borough, the building, local policies and the surrounding area.

If your ability to trade depends on a planning change, treat that as critical and build it into your negotiation. You don't want to be paying rent for months while waiting for permission.

Sector-specific licences and consents

Planning isn't the only potential obstacle. Depending on your sector, you may need separate licences or consents.

Hospitality businesses, for example, often need alcohol licensing, and some late-night activity can require additional permissions.

Other sectors may face requirements linked to food hygiene, specialist equipment, waste management, noise or public-facing safety measures.

The practical approach is to map these permissions out before you commit, then set your timeline and your lease terms with the reality of obtaining them.

If you're not sure what permissions apply, a solicitor can sometimes negotiate conditions or protections so you aren't forced to pay full rent before you can operate.

Understanding lease agreements

The pages listed below provide more detailed information on the fundamentals of a lease, so this section is more of a "what to look for" guide.

The main point is that commercial leases are rarely just about the rent. They are about risk allocation, and small clauses can have large financial consequences.

• Business leases: Your legal rights as a tenant

• Assigning and subletting a lease

• Signing and negotiating a business lease

Rent and other occupancy costs

Rent is only one part of what you pay. Many small businesses get caught out by costs that sit alongside rent, such as:

• Service charges.

• Insurance contributions.

• Utilities arrangements.

• Management fees (sometimes).

A service charge is your contribution to the upkeep and running of shared parts of a building, which is common in properties occupied by several tenants.

Service charges can rise and fall, and they can increase sharply if major works are planned.

Read more in our blog, Costs to expect when renting business premises

Length of term (and flexibility)

The term is how long you're committing for. A longer term can bring stability and sometimes negotiating power, but it can also be restrictive if your business model changes.

This is where break clauses matter. A break clause is a contractual right to end the lease early, usually with notice, and often with conditions attached.

Read more about break clauses in our blog, Business premises: Lease length, break clauses and rent reviews

Renewal rights (security of tenure)

Some business tenants have a legal right to renew at the end of the lease. This is often referred to as "security of tenure".

Many landlords ask tenants to "contract out" of these rights, which in plain English means you agree not to have the automatic right to renew.

Contracting out is common, particularly where the landlord wants certainty about repossessing the property at the end of the term.

Whether you accept this depends on how important the location is and how difficult it would be to relocate.

If your business relies heavily on footfall or a particular catchment area, renewal rights can be far more valuable than they first appear.

Read more about contracting out in our blog, Dealing with end-of-lease issues

Repairing obligations (the clause that surprises people!)

Repair clauses are a major source of unexpected cost. Many leases place the responsibility for repairs on the tenant, and some ask that you keep the premises in a better condition than when you moved in.

This is where "dilapidations" risk arises. Dilapidations are the landlord's claim at the end of a lease for the cost of bringing the premises back to the required standard.

If you're taking on repairing obligations, it's usually wise to involve a surveyor and consider a schedule of condition (a written and photographic record of the property's state at the start) so you aren't later expected to fix pre-existing issues.

Alterations and fit-out

Most SMEs need to adapt a space. That might mean:

• Installing extraction.

• Changing the layout.

• Adding partitions.

• Upgrading electrics.

• Putting up signage.

• Making accessibility improvements.

Lease terms often put limits on alterations or need the landlord's consent.

Some leases also require you to remove any alterations you've made at the end of the term and reinstate the premises, which can be a significant hidden cost.

The key is to make sure the lease reflects what you actually need to do. If your fit-out is central to your operation, be clear early on:

• What the landlord will allow.

• What consent you need.

• What evidence you must provide.

Your legal responsibilities as a tenant

Commercial property agreements often shift a meaningful share of responsibility on to the tenant, sometimes more than businesses expect.

Beyond paying the rent, you may be responsible for:

• Maintenance and repairs.

• Making sure you have appropriate insurance.

• Keeping to laws relevant to your occupation and business activity.

Even where the landlord retains responsibility for the space's structural elements, you may still be responsible for keeping your area safe and legal, particularly if you have staff on site or customers visiting.

This is why it's important to read the lease as an operational document, not just a property document.

Your solicitor can help translate the legal wording into practical obligations so you understand what you must actually do day-to-day.

Read more in our blog, Business leases: your legal rights as a tenant

Negotiating terms without getting lost in the detail

You don't need to be a property lawyer to negotiate well. What you do need is a clear view of what matters to your business and the discipline to get those points reflected in writing before the legal drafting becomes expensive.

Heads of terms

A sensible approach is to agree heads of terms first.

Heads of terms are usually not legally binding, but they set the commercial direction and make it less likely that "surprises" arise in the draft lease.

This is where you can push for a rent-free period if you need time for fit-out or permissions, or a stepped rent if cash flow will ramp up gradually.

It's also where you should get transparency on service charges and planned works, because these can make the difference as to whether a deal is affordable.

Exit routes

If flexibility is important, negotiate exit routes that are practical.

That might mean a workable break clause, or the ability to assign the lease (transfer it) or sublet if you need to downsize.

If the premises are in poor condition, negotiate a schedule of condition and sensible repair wording.

A good outcome from negotiation isn't necessarily the lowest rent – it's an agreement that you can keep to without the constant risk of running up unexpected costs.

Deposits and guarantees (what landlords typically ask for)

For newer SMEs, landlords often seek extra security. That usually comes in the form of:

• A rent deposit.

• A personal guarantee from a director.

• A guarantor company.

Typically, a rent deposit is held under a separate document that sets out when the landlord can use it. This is often when the tenant owes is rent or has breached the lease terms in some other way.

A personal guarantee is more serious because it can make an individual responsible if the business can't meet its obligations.

If a landlord asks for a guarantee, get legal advice and negotiate sensible boundaries where possible.

In practice, that can include:

• Limits on the amount guaranteed.

• A time limit for how long the guarantee applies.

• A condition that says the landlord will release the guarantee obligation once you've shown consistently that you make payments on time.

Common pitfalls to avoid

• Treating rent as the only meaningful cost: don't discover later that service charges, insurance contributions, utilities arrangements and other costs push the total far beyond your original budget!

• Unclear exit terms: many businesses assume they'll be able to leave early if they need to, only to find that the lease is rigid, break clauses are difficult to use and assignment or subletting is heavily restricted.

• Underestimating timing: planning use and licensing can delay your ability to trade. If the lease starts before you've secured those permissions, you may pay rent while the premises sit idle.

• Signing before finance is locked in: this tends to happen particularly where a premium, deposit or fit-out funding is needed. That can put you under pressure and reduce your negotiating leverage at exactly the wrong moment.

How to secure a commercial space (without nasty surprises)

Most London SMEs follow a broadly similar path, whether they're leasing, taking a licence or buying.

The safest approach is to front-load the checks that can stop you operating, then negotiate the commercial terms, then allow the legal process to do its job properly.

Step 1: choose the right type of legal arrangement for you

Begin by matching the legal arrangement to your business needs.

• If you need flexibility, prioritise exit terms and avoid long commitments that you can't unwind.

• If location is crucial and you plan to invest heavily in the space, a lease with appropriate protection may be more suitable.

The key is being honest about your likely timeframe and how painful it would be to move.

Step 2: do the "can we legally operate here?" checks

Before you spend heavily on legal fees, confirm the fundamentals.

Establish the authorised planning use of the premises and whether it fits your business. If it doesn't, understand the likely route to changing it and whether that route is realistic within your timeline.

At the same time, identify any licences or consents you'll need to trade and assess how long they tend to take in your borough.

Step 3: agree heads of terms (and put your non-negotiables in writing)

Heads of terms should reflect the points that affect your business most:

• Rent.

• Term.

• Rent-free periods.

• Break options.

• Service charge.

• Repairing obligations.

• Permission for making alterations.

• Renewal.

If you want a schedule of condition, this is the moment to insist on it. Clear heads of terms reduce the risk of drawn-out legal back-and-forth later.

Step 4: instruct the right professionals early

A commercial property solicitor is essential for most leases and purchases.

If the property's condition matters, or if you're taking on repairing obligations, involve a surveyor early as well.

Input from a surveyor is often what protects you against end-of-lease claims and helps you negotiate sensible repair wording.

Step 5: legal due diligence (the solicitor's core work)

Your solicitor will review:

• Who owns the property.

• What rights and restrictions are attached to it.

• Whether anything in the title or searches affects your intended use.

They'll also scrutinise the lease or contract terms, raise enquiries and make sure the documentation properly reflects what was agreed.

This is the stage where issues such as repair liability, permitted use, service charges, insurance arrangements and guarantee terms are properly dealt with.

Step 6: finalise permissions and fit-out approvals

If you need the landlord's consent for works, signage or alterations, get it in writing and check that it reflects what you plan to carry out.

If you need a licence (or licences), make sure the timelines for applying matches your planned opening date.

Where you're not sure whether you'll be granted permission, it may be possible to negotiate protections, but you need to raise that early rather than assuming it'll "work itself out".

Step 7: budget for the "day one" payments

As you approach completion, be prepared for the initial cash outlay. That usually includes rent in advance, a deposit, legal fees and potentially survey costs.

If there's a premium or significant fitting-out costs, confirm how those sums are paid and what conditions are attached to them.

Step 8: exchange and completion (or signature, depending on the deal structure)

Once you sign, treat the agreement as a working document.

Pull out key dates, particularly break notice deadlines, rent reviews and any time limits around repairs or reinstatement.

Missing a break notice window, for example, can mean being committed for far longer than you planned.

Step 9: Stamp Duty Land Tax and HMRC (where relevant)

Depending on the transaction, conditions around Stamp Duty Land Tax may apply, and you may need to file even when no tax is ultimately due.

Your solicitor or accountant will usually handle the technicalities, but you should understand what's being filed and the timetable so you don't accidentally miss a deadline.

Step 10: register with HM Land Registry (where relevant)

Some leases need to be registered, and purchases will be registered as a matter of course.

Registration isn't just a formality – it's part of making sure your rights are properly recorded.

Your solicitor will normally manage this, but it's worth confirming with them that they include this service and understanding when registration will complete.

Conclusion

Taking on commercial premises is a big commitment, but the legal side shouldn't feel intimidating.

The key is to slow the process down at the right moments:

• Check you can legally operate from the space.

• Get the headline terms nailed in writing.

• Make sure the lease or agreement reflects how your business actually works day to day.

If you treat the paperwork as a practical risk check – rather than something to skim at the end – you're far more likely to secure a space that supports your plans, protects your cash flow and gives you the flexibility you need as you grow.

Read more

• Renting business premises

• Business leases: your legal rights as a tenant

• Commercial leases: Some common terms you'll find in a lease agreement

Find the right support for your business

At Grow London Local, we understand that you’re passionate about your small London business. That’s why our website is packed with resources tailored to you. Find more support