For decades, the commercial property market revolved around long-term, fixed leases. These agreements offered stability for landlords and predictability for tenants. However, the rise of hybrid working, economic uncertainty, and evolving business models have accelerated the shift away from these traditional structures.
So, what can tenants expect in a modern lease?
Flexible lease terms
With ongoing economic uncertainty, businesses are reluctant to commit to 10-15 year+ leases. Instead, shorter and more flexible arrangements are becoming the norm, reflecting fluctuating headcounts and hybrid working patterns.
Where a tenant does agree to a longer lease term, it is common to include a tenant-only break option allowing the tenant to end the lease early if circumstances change and the property no longer meets their needs.
Modern break clauses are also evolving. Historically, they were conditional on the tenant achieving vacant possession (meaning even leaving behind a kettle could invalidate the break) and paying all sums due, including rent, insurance rent, and service charges. Today, break clauses are typically conditional only on the tenant giving up occupation and paying principal rent up to the break date. Tenant’s can also expect a rebate for any rent paid in advance relating to the period beyond the break date, provided that they include this in the lease provisions.
Alienation
Alienation refers to the tenant’s ability to transfer their interest in the property to another party either by assignment or by underletting. Traditionally, leases allow tenants to assign or underlet the whole of the property, subject to landlord consent and certain conditions, such as providing an authorised guarantee agreement (AGA) or meeting financial covenants.
Increasingly, modern business needs are driving greater flexibility, and tenants are requesting the ability to assign or underlet part of the property, providing greater ability to adapt to changing space requirements without needing to terminate the lease in its entirety.
Reinstatement
Traditionally, when a lease ended, tenants were required to remove any alterations made through works carried out during the term and make good any damage caused to the property in the process.
It is becoming increasingly common for landlords to have to act reasonably in requiring reinstatement and accept that any improvements or alterations which would benefit a future tenant can remain in place at the end of the term. This approach will reduce costs for tenants and enhance the property’s appeal for incoming occupiers.
Energy efficiency
Sustainability is no longer a preference—it’s a requirement. Modern leases increasingly include provisions requiring landlords to cooperate with tenants on alterations that improve the property’s energy efficiency. This reflects growing environmental obligations and tenant demand for greener premises.
Insured risks
Traditionally, landlords insure the property against standard risks. If the building is damaged or destroyed, tenants are usually relieved from repairing or rebuilding and benefit from a rent suspension whilst the building is reinstated.
Problems arise when damage is caused by an “uninsured risk” – this can occur because cover is unavailable, prohibitively expensive, or subject to onerous conditions. Many leases remain silent on this issue. Accordingly, tenants may be liable for repairs and must continue paying rent even if the property is unusable.
To avoid this, tenants are increasingly negotiating provisions to address uninsured risks. At a minimum, tenants seek:
- Rent suspension if the property is damaged, destroyed or made inaccessible by an uninsured risk.
- Exclusion of repairing obligations for uninsured risks.
- A right to terminate the lease if the landlord chooses not to reinstate the property.
Considering your property needs?
If you are a tenant planning on explaining your business, taking a new lease or your property requirements have changed in any way and you would like advice on what to expect and what to negotiate, please get in touch with a member of our team.
