4 Most Common Types of Commercial Leases in the UK

Whether you're setting up a shop, renting an office, or expanding your company into a new space, understanding the types of commercial leases in the UK is essential. Signing the right lease can help you avoid unexpected costs, ensure smoother negotiations, and secure a space that supports your long-term business goals.

In the UK, commercial leases are categorised by how costs like rent, property taxes, insurance, and maintenance are allocated. The most common types include Full Repairing and Insuring Lease (FRI) lease, Gross Lease, Net Lease and Percentage Lease.

In this guide, our commercial lease solicitors in London explain the four most common commercial lease types in the UK, what they mean for your business, and how to choose the one that best fits your needs.

If you're unsure which lease is right for you, it's always best to get expert legal advice before signing a commercial lease agreement.

Looking for clear, expert advice on your commercial lease? Speak to Wembley Solicitors today at 0203 417 3700 or email info@wembleysolicitors.com.

Table of Contents

What Is a Commercial Lease?

A commercial lease is a legally binding contract between a landlord and a business tenant that allows the tenant to use a commercial property, such as an office, shop, or warehouse, for business purposes.

The lease sets out:

• The rent amount
• Duration of the lease
• Repair and maintenance responsibilities
• Renewal terms and exit clauses
• Who pays for what (utilities, insurance, taxes, etc)

Each commercial lease structure varies in terms of cost-sharing, flexibility, and legal obligations, so it's important to choose carefully and get professional legal advice before signing.

Why Choosing the Right Commercial Lease Type Matters

The type of commercial lease you agree to can have a big impact on your cash flow, operational flexibility, and legal responsibilities. Some leases offer predictable monthly payments, while others may require you to cover additional costs like property taxes or maintenance.

Working with an experienced commercial lease solicitor can help you avoid hidden costs and negotiate favourable terms that protect your interests.

What Are the 4 Most Common Types of Commercial Leases?

The Full Repairing and Insuring Lease (FRI) lease, Gross Lease, Net Lease and Percentage Lease are the four most common types of commercial leases in the UK.

1. Full Repairing and Insuring Lease (FRI Lease)
2. Gross Lease (Full-Service Lease)
3. Net Lease (Single, Double, or Triple Net Lease)
4. Percentage Lease

1. Full Repairing and Insuring Lease (FRI Lease)

Under the Full Repairing and Insuring (FRI) lease, the commercial tenant is responsible for all costs related to repairs and insurance of the property.

In other words, the tenant must cover the cost of repairs, regardless of who caused the damage or when it occurred. While FRI lease often offers lower rent, the extra responsibilities can make it more costly over time.

2. Gross Lease (Full-Service Lease)

In a Gross Lease, also known as a Full-Service Lease, the tenant pays a single, fixed rent amount, and the landlord takes care of most property expenses like maintenance, insurance, and utilities.

In a gross lease, the landlord covers most or all operating expenses, including:

• Utility bills
• Property taxes
• Insurance
• Maintenance and repairs

Commercial tenants pay a fixed rent each month, making it easier to manage your budget without worrying about surprise costs. This lease type is commonly used for office spaces, and it is best for Startups and businesses seeking predictable monthly costs.

3. Net Lease (Single, Double, or Triple Net Lease)

A Net Lease requires the tenant to pay base rent plus some or all of the property's operating expenses. There are three main types of net lease:

1. Single Net Lease (N): You pay rent and property taxes
2. Double Net Lease (NN): You pay rent, property taxes, and insurance
3. Triple Net Lease (NNN): You pay rent, taxes, insurance, and maintenance

While this lease provides transparency and control over expenses, it requires careful budgeting to avoid unexpected financial strain. A Net Lease is best for businesses seeking long-term premises and more control over property costs.

4. Percentage Lease

A Percentage Lease, also known as percentage rent, is a type of commercial lease where the tenants pay a fixed base rent along with a percentage of their business's sales revenue, typically seen in retail leases.

This structure allows the landlord to benefit from the success of your business. In turn, tenants often enjoy lower base rent when their sales are lower. A Percentage Lease is best for retail shops, salons, restaurants, and cafes in high-footfall locations.

Pros and Cons of Different Commercial Lease Types

Choosing the right commercial lease is a big decision that can affect your business's finances, flexibility, and long-term growth. Whether you're setting up a retail shop, renting office space, or leasing a warehouse, it's important to understand the advantages and disadvantages of each lease type.

Here's a simple breakdown of the most common types of commercial leases and what they mean for you as a tenant:

Full Repairing and Insuring (FRI) Lease

Pros:

• Often lower base rent compared to other lease types.
• Greater control over how the property is maintained.
• May suit long-term tenants who want full use and control.

Cons:

• You're responsible for all repairs, inside and out, even pre-existing issues.
• You must cover the cost of building insurance, even if arranged by the landlord.
• Can lead to unexpected maintenance costs, which are your responsibility.

Gross Lease / Full-Service Lease

Pros:

• Simple and predictable monthly costs, everything is included in one rent payment.
• Landlord handles property expenses like taxes, insurance, and maintenance.
• Ideal for businesses wanting a hassle-free lease.

Cons:

• Base rent is usually higher, as it covers the landlord's expenses.
• Less control over how shared services are managed or maintained.
• Not always flexible for cost-sharing or customisation.

Net Leases (Single, Double, Triple Net)

Pros:

• Base rent tends to be lower than in gross leases.
• Gives tenants more transparency and control over property-related expenses.
• Triple net leases offer long-term stability for tenants who want full responsibility.

Cons:

• You pay for rent plus additional costs like property tax, insurance, and maintenance.
• Can be financially risky if unexpected property issues arise.
• Budgeting can be more complex due to fluctuating costs.

Percentage Lease

Pros:

• Lower base rent, especially helpful for new or seasonal businesses.
• Payments align with how well your business is doing.
• Encourages landlords to help drive footfall and support your success.

Cons:

• You pay more if your sales increase, which could impact profit margins.
• Requires accurate reporting of sales figures.
• Less predictable rent amounts from month to month.

Which Commercial Lease Is Right for You?

The right lease depends on your business goals, financial stability, and how much responsibility you're willing to take on. Here are a few things to consider:

• Do you want fixed costs, or can you manage variable bills?
• How long do you plan to stay in the property?
• Is the property already in good condition, or will you need to invest in repairs?
• Do you expect seasonal fluctuations in revenue?

Tips for Choosing the Right Commercial Lease

Choosing a commercial lease is not just about the rent; it's about protecting your business.

Here are a few quick tips:

• Think about your cash flow: Can you manage variable costs?
• Consider your growth: Will this lease still work as your business expands?
• Read the fine print: Understand break clauses, repair duties, and renewal terms.
• Get legal advice: Lease agreements are complex, and one bad clause can cost you dearly.

Legal Advice from Commercial Lease Solicitors

There's no one-size-fits-all commercial lease. The best option depends on your budget, business type, and future plans. Always review the lease terms carefully and get professional legal advice before signing.

Before signing any commercial lease agreement, it's vital to review the lease terms carefully and get professional legal advice. Every lease carries financial and legal obligations, and what looks like a great deal on paper could end up costing your business thousands in hidden liabilities.

At Wembley Solicitors, our team of experienced commercial lease solicitors in London can:

• Draft commercial lease agreements
• Review your lease agreement
• Negotiate favourable terms
• Advise on lease renewals, break clauses, and exits
• Help resolve landlord-tenant disputes

Speak to a Commercial Lease Solicitor

If you need help understanding a commercial lease, call our experienced commercial lease solicitors in London at 0203 417 3700 for clear, expert advice.

At Wembley Solicitors, we offer clear, tailored advice on all aspects of commercial leases, helping you make informed decisions for your business.