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September 24, 2025
Joe Averill
5 mins
Signing an office lease is one of the largest financial commitments a company makes outside of payroll. Yet many executives underestimate how much risk is buried in the fine print.
The headline rent per square foot may look manageable, but clauses around break rights, service charges, rent reviews, and dilapidations can quietly add millions to a five-year commitment.
For CFOs, COOs, and Facilities Directors, understanding these clauses is not a legal exercise. It is a financial safeguard. The right negotiation reduces long-term liabilities and keeps options open when business conditions change.
This guide explains the most important office lease clauses and shows how finance leaders can approach them strategically.
· High financial impact: Office space is often 10–20% of operating expenses.
· Long duration: Leases frequently run 5–15 years, tying up capital.
· Balance sheet implications: Under IFRS 16 and ASC 842, leases must appear on balance sheets as liabilities.
· Hidden costs: Service charges, repairs, insurance, and dilapidations add to rent.
A CFO who understands contracts is not only protecting the business. They are also strengthening their credibility with boards, investors, and auditors.
What it is: A clause that lets tenants end the lease early, usually on a specific date with notice.
Why it matters: Without one, your company is locked in until expiry — even if headcount shrinks or the market changes.
Negotiation tip: Push for multiple break dates across the lease term. Ensure the break clause is not conditional on unreasonable requirements (e.g. full compliance with all covenants).
What it is: A mechanism for landlords to adjust rent, often tied to market rate or inflation.
Why it matters: A modest 3% annual increase can compound to a 16% rent rise over five years.
Negotiation tip: Seek capped increases or link rent reviews to predictable indices such as RPI, with maximum thresholds.
What it is: Fees for running the building — cleaning, security, maintenance, management.
Why it matters: Service charges can rise 5–10% annually with little control from tenants.
Negotiation tip: Insist on transparency in service charge reporting and request a cap. Benchmark costs against similar buildings.
What it is: The ability to rent out part or all of your space to another tenant.
Why it matters: If growth slows or you adopt hybrid working, subletting helps avoid wasted space.
Negotiation tip: Push for broad subletting rights with minimal landlord consent restrictions.
What it is: A requirement to restore the space to its original condition at lease end.
Why it matters: These costs can exceed six figures, especially after custom fit-outs.
Negotiation tip: Seek a financial cap on dilapidations. Agree “yield-up” conditions early to limit surprises.
What it is: An incentive where landlords waive rent for a set time, often to allow for fit-out.
Why it matters: A 6–12 month rent-free period can save hundreds of thousands.
Negotiation tip: Tie rent-free periods to both move-in and break clauses, so you retain leverage.
What it is: Obligations to repair or maintain the space, plus contributions to building insurance.
Why it matters: Broad repair clauses can force tenants to pay for structural work they don’t benefit from.
Negotiation tip: Limit repair obligations to internal parts of the demised premises only.
Before signing any office lease, CFOs should:
👉 Use LEVEL’s Office Cost Calculator to run scenarios before committing.
A mid-size tech firm in Manchester signed a 10-year lease with a break at year 5. When market conditions shifted and headcount fell, they exercised the break.
Without the clause: They would have paid £2m for empty space.
With the clause: They exited with six months’ notice and reinvested in hybrid-friendly serviced offices.
A break clause lets tenants end a lease early, usually after a set period, with written notice. It provides flexibility if business conditions change.
Negotiate multiple break clauses, cap service charges, secure rent-free incentives, and insist on clear dilapidation terms.
Dilapidations are end-of-lease repair and restoration obligations. They can be significant — often overlooked until it’s too late.
Yes. Landlords often tie them to open market value, but CFOs can negotiate caps or index-based increases.
Subletting provides a safety valve if space is underutilised. Without it, tenants may pay for unused space for years.
An office lease is not simply a property agreement. It is a financial instrument that shapes risk, cash flow, and balance sheet health for years.
For CFOs, negotiating the right clauses is as critical as negotiating financing terms or supplier contracts. Approach it with financial discipline, legal support, and strategic foresight.
Before you sign, model the numbers. A single overlooked clause can cost millions.
👉 Start with LEVEL’s Office Cost Calculator to see how lease terms affect your total cost of occupancy.
Want to find your next leased, managed or serviced office space to rent? Book a call with our team today.
