What is an Office Lease? Complete Guide for Businesses

An office lease is a legally binding contract between a landlord and business tenant for the rental of commercial workspace. Unlike flexible office arrangements where you pay monthly and can leave with short notice, an office lease typically commits you to the space for 3-10 years.

In return for that commitment, you get lower costs per square foot and complete control over how the space looks and operates. You can build out exactly the office you want—but you're responsible for fitting it out, maintaining it, and returning it to the landlord in good condition when you leave.

This guide covers lease types, costs, key terms, and when a lease makes sense versus flexible alternatives. It's part of our complete guide to types of office space .

Office Lease Definition

An office lease is a formal rental agreement that gives your business exclusive rights to occupy a defined commercial space for a fixed period. It's a contract between you (the tenant) and the property owner (the landlord), setting out:

• How long you'll occupy the space
• How much rent you'll pay (and when it might increase)
• Who's responsible for repairs and maintenance
• What you can and can't do with the space
• How you can exit if circumstances change

Office leases differ from residential tenancies in several important ways. Terms are longer (years, not months). Negotiations are more complex. There's less statutory protection for tenants. And the financial stakes are much higher—a 5-year lease on a modest office could represent £500,000+ in total commitment.

The Landlord and Tenant Act 1954 provides some protection for business tenants, including "security of tenure"—the right to renew your lease when it expires, unless both parties agreed to exclude this at the outset.

Types of Office Leases

Full Repairing and Insuring (FRI) Lease

The FRI lease is the traditional structure in UK commercial property. Under an FRI lease, you're responsible for:

• All internal and external repairs
• Maintenance of the building structure (roof, walls, foundations)
• Building insurance
• Keeping the property in good condition throughout your tenancy

FRI leases are typically used when you're leasing an entire building. They give you complete control but also complete responsibility. If the roof needs replacing mid-lease, that's your problem.

Key protection: Always get a building survey before signing an FRI lease, and insist on a Schedule of Condition attached to the lease. This document records the property's state at the start, so you're not responsible for fixing problems that existed before you moved in.

Effective Full Repairing and Insuring (EFRI) Lease

The EFRI lease has become the most common structure for multi-tenant buildings. The landlord organises repairs and maintenance, but recovers 100% of costs from tenants through service charges.

You get the convenience of the landlord managing the building, but still carry the full cost. Service charges can vary significantly year to year, so negotiate a cap if possible.

Internal Repairing and Insuring (IRI) Lease

Under an IRI lease, your repair obligations are limited to the interior of your space—floors, walls, ceilings, fixtures within your demise. The landlord remains responsible for:

• External walls and roof
• Building structure
• Common areas (reception, lifts, toilets)
• Shared building systems

Costs for these are typically recovered through service charges. IRI leases are generally more tenant-friendly, though they're less common than they once were—landlords prefer to pass on more responsibility.

Licence Agreements

Technically not leases, licence agreements grant permission to occupy space without creating a formal tenancy. They're typically:

• Short-term (1-11 months)
• More flexible on notice periods
• Higher cost per square foot
• Without security of tenure protection

Licences suit businesses needing temporary space or testing a location before committing to a full lease.

How Office Leases Work

The Leasing Process

1. Search and viewings  – Identify suitable buildings through agents, online platforms, or direct approaches to landlords
2. Negotiation  – Agree key terms: rent, length, break clauses, incentives
3. Heads of Terms  – Document agreed terms in a non-binding summary
4. Due diligence  – Survey the building, check landlord's title, review service charge history
5. Legal review  – Solicitors negotiate and draft the formal lease
6. Completion  – Sign the lease, pay deposit and rent in advance
7. Fit-out  – Build out the space to your requirements (typically 3-6 months)
8. Move-in  – Finally occupy your new office

The process typically takes 3-6 months from finding a space to moving in—longer if fit-out is complex. Budget 6-12 months if you want proper choice and negotiation time.

Key Office Lease Terms

Lease Length

Standard UK office leases run 3-10 years, with 5 years being most common for mid-sized businesses. Longer leases often secure better rent but increase your risk if circumstances change.

Break clauses allow you to exit early at specified points (e.g., year 3 of a 5-year lease). Around 78% of new office leases over 7 years now include at least one tenant break right. Always negotiate a break clause—it's your main protection against changing circumstances.

Rent and Rent Reviews

Rent is quoted per square foot per year. A 2,000 sq ft office at £50/sq ft costs £100,000 annually (plus VAT, service charges, and rates on top).

Rent reviews typically occur every 3-5 years. Most are "upward only"—your rent can increase to match market rates but won't decrease if the market falls. Some leases tie reviews to inflation (RPI or CPI); others use open market valuations.

Security Deposit

Landlords typically require 3-6 months' rent as a security deposit, held against unpaid rent or damage. Stronger covenants (established businesses with solid finances) may negotiate lower deposits.

Dilapidations

At lease end, you're typically required to return the property to its original condition. This means removing alterations, redecorating, and repairing any damage. Dilapidation costs typically range from £15-35 per square foot—a 5,000 sq ft office could face a £75,000-175,000 bill.

You can negotiate a settlement with the landlord rather than doing the work yourself, but budget for this cost from day one.

Alienation Clause

This governs whether you can:

• Assign  the lease (transfer it to another tenant)
• Sublet  part or all of the space
• Share  occupation with group companies

Flexible alienation rights protect you if you need to downsize or relocate before your lease ends. Without them, you could be paying for empty space.

Use Clause

Specifies what business activities are permitted. Standard office use is usually fine, but check if you need anything unusual (retail, light manufacturing, food preparation). Changing use later can be difficult.

Office Lease vs Flexible Options

Office Lease vs Serviced Office

Serviced offices cost more per desk but offer speed, flexibility, and predictable costs. Leases cost less long-term but require significant capital and commitment.

Compare with serviced offices .

Office Lease vs Managed Office

Managed offices sit between leases and serviced offices. You get customisation and branding (like a lease) but the provider handles operations (like serviced). Terms are typically 1-5 years with 6-12 week setup.

If you want a branded, custom space but can't commit to a 5-10 year lease or manage your own fit-out, managed offices offer a middle path.

Learn about managed offices .

Office Lease vs Private Office

Private offices are individual rooms within serviced buildings—typically for smaller teams (2-20 people). Traditional leases suit larger, established businesses wanting complete control over their environment.

Explore private offices .

Office Lease Costs UK

Rent Per Square Foot

Additional Costs

On top of headline rent, budget for:

These additional costs can add 40-60% to your headline rent in Central London.

Total Upfront Costs

For a typical 5,000 sq ft office lease:

• Security deposit (6 months): £25,000-50,000
• Rent in advance (3 months): £12,500-25,000
• Legal fees: £8,000-15,000
• Agent fees: £10,000-20,000
• Fit-out (mid-spec): £150,000-300,000
• Total: £200,000-400,000+

This is why leases suit businesses with capital and certainty—the upfront investment is substantial.

Who Should Consider Office Leases?

Traditional leases make sense for:

• Established companies (50+ employees)  – Scale justifies the complexity
• Businesses with stable headcount  – Predictable needs for 3-5+ years
• Companies wanting full control  – Over design, access, and operations
• Organisations needing extensive customisation  – Specialist fit-outs
• Businesses with capital for fit-out  – Can afford £100,000+ upfront

Advantages of Office Leases

• Lowest cost per square foot  – Significantly cheaper than flexible options over time
• Complete customisation  – Build exactly the office you want
• Stability and permanence  – Your address, your space, your identity
• Full control  – Over branding, access, security, and operations

Disadvantages of Office Leases

• Long-term commitment  – 3-10 years is a significant obligation
• High upfront costs  – £100,000-400,000+ before you move in
• Fit-out time  – 3-6 months of project management before move-in
• Maintenance responsibilities  – You handle (or pay for) everything
• Less flexibility  – Hard to grow or shrink quickly
• Dilapidation costs  – Potentially £50,000-200,000+ at lease end
• Exit risk  – If you need to leave early, it's expensive

Office Lease Negotiation Tips

Negotiate rent-free periods. It's standard practice to receive 1 month rent-free for every year of lease. A 5-year lease should include at least 5 months rent-free—use this for fit-out.

Insist on a break clause. This is your most important protection. A 5-year lease with a year-3 break gives you an exit if circumstances change.

Cap service charges. Prevent nasty surprises by capping annual increases (e.g., RPI + 2%).

Negotiate rent review terms. If possible, avoid pure "upward only" reviews. Cap increases or tie reviews to inflation.

Secure alteration rights. Get permission for your fit-out works upfront, and clarify what requires landlord consent.

Confirm assignment/subletting rights. Flexibility to transfer or sublet protects you if you need to exit early.

Request landlord fit-out contribution. Some landlords contribute to tenant fit-out costs, especially in competitive markets.

Get everything surveyed. Building survey before signing; Schedule of Condition attached to the lease.

Common Office Lease Mistakes

Underestimating total costs. Headline rent is just the start—factor in service charges, rates, fit-out, and dilapidations.

Ignoring dilapidation obligations. That £150,000 end-of-lease bill comes as a shock to many tenants.

Weak break clause conditions. Ensure break conditions are narrow and achievable—broad conditions like "compliance with all covenants" can be impossible to satisfy.

Overcommitting on space. Leasing for projected growth that never materialises leaves you paying for empty desks.

Skipping legal review. Commercial leases are complex. Professional review costs £5,000-10,000; mistakes can cost £100,000+.

Not negotiating. Everything is negotiable—rent, terms, incentives. Don't accept the first offer.

FAQs

How long are office leases typically? 3-10 years is standard, with 5 years being most common. Shorter terms (1-3 years) are possible but may come with higher rent or fewer incentives.

Can I leave an office lease early? Only if you have a break clause and satisfy its conditions. Otherwise, you're liable for rent until the lease ends—or until you assign it to another tenant.

What are dilapidations? End-of-lease costs to return the property to its original condition. Expect £15-35 per square foot. Always budget for this from the start.

Who pays for repairs in an office lease? Depends on lease type. FRI leases make you responsible for everything; IRI leases limit you to internal repairs. Always check the specific terms.

Can I sublet my office? Only if your lease permits it. Most leases require landlord consent, and you'll likely need to guarantee the subtenant's obligations.

What's a rent-free period? Months at the start of your lease where no rent is due—typically used for fit-out. Standard is approximately 1 month per year of lease term.

What are Heads of Terms? A summary of agreed lease terms before formal legal drafting. Usually non-binding but sets the framework for negotiation.

Do I need a solicitor for an office lease? Yes. Commercial leases are complex legal documents. Professional review is essential—budget £5,000-15,000 for legal fees.

Conclusion

Traditional office leases offer the lowest long-term costs and complete control—but require significant capital, long commitment, and ongoing management.

They suit established businesses with stable headcount and capital for fit-out. For startups, fast-growing companies, or businesses with uncertain futures, flexible alternatives like serviced offices or managed offices often make more sense.

If you're considering a lease, work with experienced agents and solicitors. Negotiate hard on break clauses and rent-free periods. And budget realistically—the true cost far exceeds headline rent.

Explore all options in our guide to types of office space , or talk to an office broker who can compare leased and flexible options.

Sources: Oktra 2025-2026, Knight Frank 2025, Savills 2024, BizSpace 2025, Pilcher London 2025, Tally Workspace 2024, Free Office Finder 2025, Templates UK 2025

Last updated: January 2026