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Signing a lease for a shop, office, or industrial unit is a milestone. You get the keys, picture your sign above the door, and imagine the buzz of opening day. But fast forward five years: you’re moving out, and suddenly you’re hit with a “Schedule of Dilapidations” from your landlord. They want £40,000 to replace carpets, repaint walls, and fix the roof—even though the roof was leaking when you moved in.

It feels unfair, but in commercial property law, the lease you signed may force you to leave the building in better condition than you found it. Many small business owners only discover this when it’s too late.

Who Needs to Pay Attention?

• Restaurateurs and café owners

• Pub landlords

• Hair salon and beauty clinic owners

• Dental principals

• Retailers and boutique owners

• Anyone with a physical business premises

If you sign a commercial lease, these risks are yours.

The Clauses That Bankrupt Small Businesses

1. The “Full Repairing” Trap (FRI)

The Scenario:
A young couple rents a charming but tired Victorian shop for their café. The lease is “Full Repairing and Insuring” (FRI). Two years in, the back wall subsides. The landlord says: “Your problem. You signed an FRI lease.” They’re now liable for structural repairs that could wipe out their profits for years.

Why It’s a Killer:
With an FRI lease, you’re responsible for all repairs—structural, cosmetic, and everything in between. If you didn’t document the property’s condition at the start, you could be forced to return it in “good repair,” even if it was never in good repair to begin with.

What to Do:

• Never sign an FRI lease for an old or tired building without a “Schedule of Condition”—a detailed photo and written survey attached to the lease.

• The lease should state: “Tenant need not return the property in any better state than evidenced in the Schedule of Condition.”

• Take your own photos and keep records, even if the landlord provides a schedule.

2. The “Upward-Only” Rent Review

The Scenario:
A gym owner signs a 15-year lease at £50k per year. The market crashes, and local rents drop to £30k. The rent review clause is “Upward-Only,” so their rent stays at £50k—even as the market recovers only to £40k. They’re stuck paying above-market rates for years.

Why It’s a Killer:
Upward-only reviews mean your rent can go up, but never down, even if the market tanks.

What to Do:

• Try to negotiate for “RPI-linked” reviews (tied to inflation, with a cap and collar).

• Ask for a “break clause” just before the review date, so you can walk away if the rent becomes unaffordable.

• If you can’t avoid upward-only, at least know when the reviews are and plan your business cashflow accordingly.

3. The “Impossible Break” Clause

The Scenario:
You have a break clause at Year 3. You give notice, but the landlord finds a scuff mark on the skirting board and rejects your break notice. The clause says: “Tenant must yield up the property with vacant possession and in substantial repair.” Because of the scuff, you’ve arguably failed the condition and are stuck for another two years.

Why It’s a Killer:
Break clauses with strict compliance requirements are a common trap. Landlords can use minor breaches to block your exit.

What to Do:

• Insist the break condition is not absolute. The clause should require “material compliance” or simply “vacant possession,” not “strict compliance with all covenants.”

• Get written confirmation of what’s required to exercise the break.

4. Service Charge “Sweepers”

The Scenario:
You rent an office in a block. The service charge is £2k/year. The landlord decides to upgrade the lobby with marble floors, and your share is suddenly £15k. The lease has a “sweeper clause” allowing the landlord to recover “any costs of improvement.”

Why It’s a Killer:
Service charges should cover maintenance and repair, not improvements or upgrades you didn’t ask for.

What to Do:

• Cap the service charge if possible, or at least limit it to maintenance and repair, not improvements.

• Ask for a clear list of what’s included and excluded.

• Watch for vague language like “any other costs as the landlord may determine.”

Other Common Pitfalls

• Personal Guarantees: Many leases require a director’s personal guarantee. If the business fails, your personal assets are at risk.

• Alienation Clauses: Restrictions on assigning or subletting can make it impossible to exit early or transfer the lease.

• Insurance Costs: Some leases let landlords recover inflated insurance premiums from tenants.

Why AI Contract Review Helps

A commercial property solicitor costs at least £1,500—daunting for a small shop or café. Most tenants sign what’s put in front of them, only to regret it later.

AI contract review tools spot the “FRI” clause, “upward-only” rent review, missing “Schedule of Condition,” and other red flags in seconds. They tell you exactly what to ask for:
“I need a Schedule of Condition attached, or I’m not signing.”
They help you negotiate from a position of knowledge, not fear.

Final Thought

A commercial lease is one of the biggest commitments your business will ever make. With the right knowledge and tools, you can avoid the traps, protect your investment, and focus on growing your business—not fighting your landlord.

Disclaimer: This content is for general information only and does not constitute legal, financial, or tax advice. Outcomes may vary depending on your individual circumstances.