Signing a commercial lease can sometimes feel like learning a new language. Between “break clauses,” “rent-free periods,” and “service charges,” the terminology alone can be confusing, and that confusion can end up costing you.

If you’re looking to rent office space in London (or anywhere in the UK), understanding what these terms actually mean will help you make smarter decisions and avoid nasty surprises later on.

Here’s a breakdown of the most common commercial property terms every tenant should know - and what to look out for before you sign on the dotted line.

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Rent-Free Period

A rent-free period is what it sounds like - a time at the beginning of your lease when you don't have to pay rent.

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Landlords often offer it as an incentive to get tenants, especially if you are signing a longer lease or moving into a space that needs work before you can use it. You can think of it as a discount that lasts the whole time you have the lease.

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For instance, if you sign a five-year lease and get three months of free rent, your total cost goes down, even though the monthly rent will still look the same on paper.

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Tip: Always check to see if the rent-free time applies only to rent or also to utilities and service charges.

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Break Clause

A break clause gives either you (the tenant), your landlord, or both parties the right to end the lease early.

This can be a lifesaver if your business changes, for example, you grow faster than expected and need more space, or decide to go hybrid and downsize.

But break clauses can come with strict conditions. You might need to give several months’ notice in writing, have no outstanding payments, and leave the property in good condition. Miss one of these requirements, and you could lose your right to break the lease.

Tip: Always ask your solicitor to check the break clause wording carefully. Even one unclear sentence can make a big difference.

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Service Charge

If your office is part of a shared building, the service charge covers the cost of maintaining common areas. Such as, lifts, corridors, cleaning, landscaping, or building security.

Each tenant pays a share based on the size of their space. The tricky part is that service charges can vary year to year, depending on what work the landlord carries out.

Tip: Ask for a breakdown of past service charges before you sign. It’ll give you a clearer idea of what to expect, especially in older or high-maintenance buildings.

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Business Rates

Business rates are a tax charged by local councils on commercial properties. The amount you pay depends on your property’s “rateable value,” which is set by the Valuation Office Agency (VOA).

It’s not included in your rent unless you’re in a serviced office, where everything is included in the rent.

You should check your property's rateable value online as soon as possible, as it can have a big impact on how much you pay each month.

Tip: Some small businesses qualify for rate relief, so always check if you’re eligible before budgeting.

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Full Repairing and Insuring (FRI) Lease

An FRI lease means the tenant is responsible for both maintaining and insuring the property - not just their individual office, but sometimes the entire building structure or roof.

These leases are common in traditional long-term agreements and can come as a surprise if you’re used to flexible or managed offices where most costs are handled for you.

Tip: Before signing, ask exactly what “repairs” include and whether the landlord will cover any part of major maintenance (like the boiler or roof).

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Dilapidations

“Dilapidations” refer to the costs you may need to pay at the end of your lease to return the property to its original condition.

If you’ve added partitions, painted walls, or changed flooring, you might be required to undo those changes or pay the landlord to do it for you. The amount can sometimes be substantial, so it’s something to plan for early on.

Tip: Take photos of the space when you move in and agree a “schedule of condition” with the landlord. This protects you from being charged for damage that was already there.

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Heads of Terms

You will often receive a "Heads of Terms" document before you sign a lease. This lays out the main points that both sides have agreed on, such as the rent, the length of the lease, the break clause, and so on, before the legal drafting begins.

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Even though it's not legally binding, it sets the tone for your final lease. If something in it doesn't match what you have discussed, say something right away so it doesn't become a problem later.

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Rent Review

Many commercial leases include a rent review, usually every 3-5 years. This lets the landlord change the rent to reflect what is happening in the market.

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An "upward-only" rent review means that the rent can go up but not down. Ensure you know when reviews happen and how the new rent will be calculated.

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Tip: Ask if the rent review is based on the value of the open market, inflation (RPI), or a set percentage increase. Each of these will have very different results.

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Security of Tenure

This refers to your right to stay in the property once your lease ends. Under the Landlord and Tenant Act 1954, many commercial tenants automatically have this protection - meaning you can request a new lease on similar terms.

However, some landlords choose to exclude this right (“contract out”) in the lease. If that’s the case, you’ll have no automatic right to renew.

Tip: Always clarify whether your lease includes or excludes security of tenure before signing.

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Conclusion

Commercial property jargon doesn’t need to be intimidating. Once you know what the key terms mean and how they affect you, you can approach any lease negotiation with confidence.

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Understanding what each term means can help you spot risks, negotiate better deals, and feel more confident about your next office move.

And if you’re starting your search, Found can help you find office spaces that fit your business and make sense of every part of the lease before you commit.

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