5 Clauses Every Commercial Lease Should Have to Avoid Disputes

A commercial lease can look deceptively standard, but the fine print is where future disputes are won or lost. Clear, practical drafting saves time, cost and stress for both landlord and tenant. Below are the five clauses every commercial lease should contain (and get right) if you want to minimise friction during the term and at exit. Each clause includes what to cover, why it matters, and simple drafting tips you can take to your solicitor.

1) Repairing & Maintenance Obligations

Disagreements about the state of the property are among the most common – and expensive – commercial lease disputes. A robust repairing covenant sets the baseline for what the tenant must keep in good order and what the landlord must provide.

Scope: Spell out whether obligations cover the interior only, or also structural elements, the roof, external walls, windows and common parts. For multi-let buildings, align repairing duties with service charge obligations.
Standard of repair: Avoid vague terms like “good condition” unless you define them. Better: require repair to “no worse condition than at the start of the term, fair wear and tear excepted”.
Schedule of Condition: Attach photo-rich schedules to show the property’s state at commencement. This reduces “he said, she said” at dilapidations time.
Statutory compliance: Clarify who pays for compliance with health and safety, fire, accessibility and environmental rules. If improvements (not just repairs) are needed, state whether these fall to the landlord, the tenant, or are shared.
Services & plant: Identify responsibility for HVAC, lifts, boilers, and other shared systems. Specify maintenance regimes, servicing intervals and evidence the tenant must provide.

Why it matters: Ambiguity here leads to dilapidations claims at lease end and recurring mid-term disputes about leaks, AC failures or roof integrity. The more precise the clause and the better the schedule of condition, the fewer surprises later.

2) Service Charge & Operating Costs

For multi-let properties and estates, the service charge clause is the engine room of day-to-day cooperation. Poorly drafted cost-sharing provisions quickly become flashpoints.

What’s recoverable: List included services (cleaning, security, landscaping, lighting, insurance recharges, management fees) and explicitly exclude landlord capital improvements unrelated to tenant benefit, letting costs, or remedies for original construction defects.
Budgeting & caps: Require an annual budget, on-account payments, and an end-of-year reconciliation with audit rights. Consider an annual percentage cap on increases, or a smoothing mechanism for major works.
Fair apportionment: State the basis (floor area, rateable value, or a fixed percentage). Provide a method for recalculating if areas are remeasured or parts are vacated.
Transparency: Landlord to provide breakdowns, copies of major invoices on request, and advance notice for works above a stated threshold.
Planned maintenance: Include a sinking or reserve fund where appropriate, with rules on contributions, permitted uses and interest.

Why it matters: Clear boundaries for what can be charged and how to reduce arguments when bills arrive, especially after major repairs or upgrades.

3) Rent Review Mechanism

A clean rent review clause protects both parties: landlords maintain asset value; tenants avoid arbitrary uplifts. Problems arise when the review method or timelines are fuzzy.

Method: Choose the basis: open market (commonly upward-only), index-linked (e.g., CPI+X%), or turnover rent for certain sectors. Define the index precisely and provide fall-back if the index is discontinued.
Assumptions & disregards: For open market reviews, list assumptions (e.g., property in good repair, with necessary consents) and disregards (tenant’s improvements, goodwill, or damage from insured risks) to keep the hypothetical letting fair.
Timetable & notices: Set out dates for service of review notices, counter-notices, evidence exchange and the valuation date. Permit interim rent if the review overruns.
Third-party determination: If parties can’t agree, specify appointment of an independent expert or arbitrator, allocation of costs, and the expert’s powers (e.g., to inspect, request documents).
Worked example (optional): For index-linked reviews, an illustrative calculation helps avoid arithmetic quarrels.

Why it matters: A well-signposted process deters brinkmanship and keeps the review focused on valuation fundamentals rather than procedural wrangles.

4) Break Clause (Early Termination) & Conditions

A break clause gives flexibility but is a notorious litigation trap when conditions are drafted too strictly. The goal is effectiveness without ambush.

Conditions limited to essentials: Tie validity to payment of principal rent only (not every penny of interest or service charge), and to giving vacant possession. Avoid catch-alls like “material compliance with all covenants”.
Practical vacating: Define what vacant possession means: removal of goods, debranding, return of keys/fobs, and meter readings.
Break fee & notice: If a fee is required, state the amount and payment method. Specify notice period, service method, and the recipient’s exact details. Allow service by email only if you are confident in receipt rules and mailbox monitoring.
Yielding up: Set reasonable reinstatement obligations for alterations and signage, with a notice mechanism so the tenant knows what the landlord actually wants reinstated.
Waiver & confirmation: Permit the landlord to waive minor defects in compliance and to confirm in writing that the break has been validly exercised, giving both sides certainty.

Why it matters: Break disputes are expensive and binary—either the lease ends or it doesn’t. Tight, fair drafting dramatically reduces the risk of an unintended “trapped” tenant or unexpected vacancy.

5) Alienation (Assignment, Underletting & Sharing)

Businesses evolve. The alienation clause governs when the tenant can assign, sublet or share occupation (e.g., with group companies or via serviced space).

Reasonableness & process: Landlord’s consent should not be unreasonably withheld or delayed. Include a clear checklist of information the tenant must supply with its application.
Covenants & guarantees: On assignment, the landlord may require an Authorised Guarantee Agreement (AGA) from the outgoing tenant, or a guarantor for the incoming tenant. Define when each is appropriate.
Underletting terms: Require subletting at not less than open market rent, on terms no more favourable than the lease, with coterminous rent review cycles where possible.
Group sharing & desks: Permit intra-group sharing or short-term desk licences with conditions (no exclusive possession, no security of tenure, no registration required), to reflect modern occupation models.
Change of control: For corporate tenants, address whether a change in control counts as an assignment and the circumstances in which consent is needed.

Why it matters: Predictable transfer and sharing rights keep space usable across business cycles while preserving the landlord’s control over covenant strength and building mix.

Smart Add-Ons That Support the Big Five

While the five clauses above do most of the heavy lifting, a few supporting provisions can further reduce the risk of conflict:

Insurance & damage: Clarify who insures the building and what happens after damage—rent suspension triggers, reinstatement timelines, and termination if reinstatement is impossible.
Dispute resolution & escalation: A simple stepped process—negotiation between named contacts, then mediation, then expert determination/arbitration—keeps disagreements proportionate.
Notices: Set out valid methods (post, hand delivery, confirmed email) and deemed service times. Include up-to-date addresses and a duty to notify changes.
Compliance co-operation: Mutual obligations to share information and access for statutory inspections (e.g., fire risk assessments, EPC-related works) prevent last-minute standoffs.

Practical Drafting Tips

Define terms up front: If a word can carry multiple meanings (e.g., “premises”, “common parts”), define it in the interpretation section and keep usage consistent.
Use schedules: Put technical details—service specifications, plans, schedules of condition, and rent review assumptions—into schedules so they can be updated without reopening the whole document.
Align the lease with heads of terms: Most disputes are baked in at the HoTs stage. Ensure the lease reflects what was commercially agreed and close any gaps.
Think lifecycle: Sense-check each clause at day 1 (fit-out), day 500 (mid-term issue), and day 1,800 (exit) to spot unintended consequences.

Mini-FAQ

Are these clauses landlord- or tenant-friendly? They can be balanced. The goal is clarity and proportionality so both sides know their risks and remedies.

Can we rely on a standard precedent? Precedents are a good starting point, but every property, tenant covenant, and building setup is different. Tailoring prevents cookie-cutter gaps that later become disputes.

What if we’re already in dispute? Check the notice and dispute resolution clauses first. Many conflicts de-escalate when the process is followed and timelines are observed.

Disclaimer: This article provides general information only and is not legal advice. Always take advice from a qualified solicitor on your specific commercial lease and circumstances.

For more information on a Commercial Lease contact Blake-Turner.