What to Consider with an Agreement for Lease in Commercial Property

In any commercial property transaction, the Agreement for Lease is one of the most important legal documents you will have. This agreement stipulates the terms and conditions that need to be met before a formal lease is granted—acting as a binding commitment between landlord and tenant ahead of the actual lease. Whether you’re a landlord or a tenant, understanding what to look for in these agreements is essential to safeguard your interests and prevent expensive disputes down the line.

Understanding the Agreement for Lease

An Agreement for Lease is a contract in which a landlord and tenant agree to enter into a lease at a future date, once specific conditions are satisfied. These conditions might include finishing construction work, securing planning permission, or obtaining approvals from third parties.
Unlike a simple offer letter or heads of terms, an Agreement for Lease is legally binding. Once the stated conditions are met, both parties are obligated to proceed with the lease on the terms agreed.

Key Points to Consider

1. Conditions Precedent
   These are the requirements that must be fulfilled before the lease can take effect. Examples are likely to include:
   •    Completion of building or renovation work
   •    Obtaining necessary planning permissions or licences
   •    Passing required inspections or surveys
   •    Gaining approval for fit-out plans
   Tenants should make sure these conditions are clear and achievable, while landlords should set realistic expectations and deadlines.
2. Lease Terms
   Even though the lease will be granted in the future, the Agreement for Lease should set out all key lease terms, such as:
   •    Rent and review procedures
   •    Lease length and any break options
   •    Repair and maintenance obligations
   •    Service charges and insurance arrangements
   •    Permitted uses and any restrictions
   A detailed agreement helps avoid surprises when the lease is finalised.
3. Timelines and Deadlines
   The agreement will also need to specify:
   •    When conditions must be satisfied
   •    Any longstop dates (after which either party can walk away if conditions aren’t met)
   •    Deadlines for fit-out or moving in
   Clear timing keeps both sides on track and reduces the risk of delays
4.  Landlord Works and Warranties
   If the landlord is responsible for construction or refurbishment, the agreement should clarify:
   •    The scope of the work
   •    Target completion dates
   •    Standards of workmanship
   •    What happens if there are delays (such as liquidated damages or rent-free periods)
   Tenants may also want warranties or guarantees covering the landlord’s work.
5. Tenant Fit-Out Obligations
   If tenants are fitting out the premises, the agreement may require:
   •    Landlord approval of fit-out plans
   •    Deadlines for completing the work
   •    Reinstatement obligations at the end of the lease
   Setting these terms clearly helps prevent arguments during or after the fit-out period.
6. Termination Rights and Remedies
   If either party fails to meet their obligations, the agreement should address:
   •    The right to terminate
   •    Financial penalties or compensation
   •    Procedures for resolving disputes
   Spelling out these remedies ensures both sides know where they stand if things go wrong.
7. Assignment and Subletting Before Completion
   Sometimes, a tenant may want to transfer their rights under the agreement before the lease starts. Landlords should decide in advance whether this will be allowed, and on what terms.

An Agreement for Lease is not just a box to tick—it lays the groundwork for a smooth and successful tenancy. Whether you’re developing new retail space or moving into refurbished offices, it’s crucial for both landlords and tenants to approach this agreement with care, clarity, and the benefit of correct legal advice. Overlooking the details can lead to costly problems, delays, or disputes. Seeking legal advice early on, will help ensure a seamless transition from agreement to formal lease reducing the risk of any unexpected costs arising further down the line.

If you are looking at a lease or license agreement or just want to fully understand what you're signing up for – our Commercial Property Solicitors will make sure your next step is the right step for you. Just call 01926 491181 or email: JamesW@moore-tibbits.co.uk.