Essential tenancy documents that every UK commercial tenants should know

When taking on a commercial property, most tenants focus first on the rent, location, and lease length. But the documents behind the tenancy are just as important. These papers explain what the tenant is agreeing to, what the landlord is responsible for, and what costs or obligations may apply during the lease.

For businesses looking for office space, especially in Central London, reviewing these documents carefully can help avoid confusion in the tenancy.

A quick guide to the essential tenancy documents:

• Heads of terms
• Lease agreement
• Lease plan
• Rent deposit deed or Guarantee
• Energy Performance Certificate
• Schedule of condition
• Service charge information
• Landlord and Tenant Act 1954

Essential tenancy documents are the key documents that set out the relationship between a landlord and tenant in the UK. In a commercial lease, they explain what space is being let, how long the tenant can occupy it, what rent and other costs are payable, and what responsibilities each party has during the lease.

Heads of terms are a short document that sets out the main points agreed between a landlord and tenant before a commercial lease is drafted. They are usually prepared once both sides have agreed the basic deal, but before solicitors start working on the full lease.

In a commercial tenancy, heads of terms usually cover:

• The property address
• The space being let
• The proposed lease length
• The annual rent
• Whether rent is paid monthly or quarterly
• Any rent-free period
• Service charge and insurance costs
• Rent review terms
• Break clause options
• Repair responsibilities
• Whether the lease is inside or outside the Landlord and Tenant Act 1954
• Any fit-out or alteration requirements

Heads of terms are important because they act as the roadmap for the lease. They help both the landlord and tenant understand what has been agreed before the legal documents are prepared.

They are often not fully legally binding, but tenants should still read them carefully. If something important is missing or unclear at this stage, it can lead to delays, extra legal costs, or disputes later.

In simple terms, heads of terms are the agreed summary of the commercial deal before it becomes the formal lease.

The lease agreement is the main legal document in a commercial tenancy. It gives the tenant the right to occupy the premises for an agreed period and sets out the obligations of both the landlord and the tenant.

Unlike the heads of terms, the lease agreement is legally binding once completed. It should reflect the commercial terms already agreed, but it will usually go into much more detail.

The lease is also where important legal protections or exclusions are recorded. For example, some business leases are protected by the Landlord and Tenant Act 1954, which can give tenants a right to renew their lease at the end of the term. Other leases are “contracted out”, meaning the tenant may not have the same automatic renewal rights.

For longer leases, the lease agreement and lease plan may also be needed for HM Land Registry registration. In England and Wales, leases granted for more than seven years usually need to be registered.

A lease plan is a drawing attached to the lease agreement that identifies the exact area being let to the tenant. It forms part of the legal documentation and helps define the extent of the premises included in the lease.

A lease plan will typically show:

• The boundaries of the leased premises
• Entrances and access points
• Shared or common areas
• Parking spaces, if included
• Storage areas or ancillary accommodation
• Rights of access over communal parts

For leases that must be registered with HM Land Registry, the lease plan must meet certain requirements. In England and Wales, leases granted for more than seven years generally require registration, and the accompanying plan must be sufficiently accurate to identify the property.

A rent deposit deed or guarantee is used when the landlord wants extra financial security from the tenant. This is common where the tenant is a new business, has limited trading history, or where the landlord wants protection against unpaid rent or other breaches of the lease.

A rent deposit deed records money paid by the tenant and held as security during the lease. The deed should explain:

• How much deposit is being held
• Where the deposit will be held
• When the landlord can use the deposit
• Whether the tenant must top it back up after deductions
• When will the deposit be returned
• Whether interest is payable on the deposit

A guarantee is slightly different. It means another person or company agrees to be responsible if the tenant fails to meet its lease obligations. This could be a parent company guarantee or, in some cases, a personal guarantee from a director.

An Energy Performance Certificate, or EPC, shows how energy efficient a commercial property is. It gives the building an energy rating from A to G, with A being the most efficient and G being the least efficient.

In England and Wales, many commercial properties must meet Minimum Energy Efficiency Standards before they can be rented. Since April 2023, landlords generally cannot continue to let non-domestic properties with an EPC rating below E, unless a valid exemption applies.

Tenants should check:

• What EPC rating the property has
• Whether the certificate is still valid
• Whether improvement works are needed
• Whether those works could affect occupation
• Whether energy efficiency is mentioned in the lease
• Who is responsible for energy-related improvements

A schedule of condition records the condition of the premises at the start of the lease. It usually includes written notes and photographs showing the state of the property before the tenant moves in.

This document is especially important in commercial leases because tenants may be responsible for repairing and maintaining the premises during the lease. Without a schedule of condition, there may be more room for disagreement at the end of the tenancy about what damage already existed and what the tenant is responsible for.

A schedule of conditions may record:

• Walls, floors, ceilings, and windows
• Doors, fixtures, and fittings
• Existing damage or wear and tear
• Condition of decoration
• Mechanical and electrical items, where relevant
• External areas, if included in the lease

Service charge information explains the shared building costs that a tenant may need to contribute to during the lease. This is common in multi-let commercial buildings, where several tenants share facilities, services, and communal areas.

Service charges may cover costs such as:

• Cleaning and maintenance of common areas
• Building security
• Lift maintenance
• Reception or concierge services
• Lighting, heating, and power for shared spaces
• Repairs to shared parts of the building
• Landscaping or external maintenance
• Managing agent fees

For tenants, they should check the followings before signing the contract:

What services are included in the service charge?
Is there a service charge budget?
Are previous service charge accounts available?
Is there a cap on service charge increases?

Landlord and Tenant Act 1954 documents are important because they affect whether a commercial tenant has the right to renew their lease when the lease term ends.

In England and Wales, many business tenants have statutory renewal rights under the Landlord and Tenant Act 1954. This means they may have the right to remain in occupation and request a new lease at the end of the existing term.
However, some leases are contracted out of the Act. If a lease is contracted out, the tenant usually gives up automatic renewal rights before the lease is completed.

The key documents may include:

• A landlord’s warning notice
• A tenant’s declaration
• Renewal notices
• Section 25 notices from the landlord
• Section 26 requests from the tenant

For tenants, this is important because it affects what happens at the end of the lease. A protected lease may give more security, while a contracted-out lease may give the landlord more control over whether the tenant can stay.