Top Legal Challenges Faced by Small Businesses in Commercial Property Leases

12 Aug 2025

By Gregor Duthie, Legal Director, Commercial Real Estate, Gilson Gray

Small businesses are essential to communities throughout the UK. Not only do they provide essential services, but they’re also a major source of employment. But when most people visit a local shop, they don’t consider the hard work and complexities that go into running a business. Commercial property leases are just one of these challenges. Fortunately, entrepreneurs can learn to effectively navigate small business lease agreements and set themselves up for success. Here are some common legal challenges in commercial leases that every business owner should be aware of.

1. Not Understanding the Scope of the Agreement

Commercial leases can be long and full of legal jargon. For most, these dense documents are hard to read and comprehend. Too often, small business owners end up signing a lease they don’t fully understand. When you’re presented with a commercial lease, always ask questions before signing the dotted line. Be sure you have a firm grasp of the following details:

• What is the lease term, and is there a break clause if things don’t work out?
• What are the exact boundaries of the property being leased?
• Are there restrictions on how the property can be used?
• What maintenance are you responsible for?

2. Rent Review Clauses

Many commercial leases allow landlords to increase the rent at certain intervals, which can lead to increasing prices, especially in major cities like London and Edinburgh. Be sure to identify any rent review clauses and be aware of the following:

• Rent can only stay the same or increase, regardless of market conditions. It can never go down.
• Rent is adjusted to the current open-market value, which may need to be subject to negotiation.
• Alternatively, Rent may be tied to an inflation index which may produce a large increase unless it is subject to a cap.

3. Issues With Repairs and Maintenance

Misunderstandings about who is responsible for repairs are the root of many commercial lease disputes. Most UK commercial leases are fully repairing and insuring (FRI), meaning the tenant shoulders full responsibility for repairs – in some cases even for defects that existed before they moved in. So, without the right legal protections, tenants can find themselves liable for costly repairs that aren’t their fault. Before you enter into a small business lease agreement, it is often wise to request a schedule of condition that provides a detailed record of the property’s condition at the time of lease. This can limit your liability and protect you from some repair costs in the future.

4. Disputes Over Break Clauses

Break clauses in real estate law allow tenants or landlords to end a lease early without facing any penalties. However, these clauses often come with strict conditions that can catch small businesses off guard. For instance, failing to give notice in the correct form or within the specified timeframe can invalidate a break clause. When you receive a lease agreement, read through the break clause and ask questions about any ambiguous language. Should you need to break your lease, it is wise to consult your solicitor to ensure that the conditions are properly met.

5. Restrictions on How the Property Can Be Used

Does your lease include details about how the property can and can’t be used? Be sure to check. Most commercial leases will require tenants to obtain landlord consent before they sublet the property or make any alterations to it. There may also be a restriction on where you can place signage. In addition to causing property lease legal issues, this problem can stifle business growth in the long term. Consider discussing your business plans with the potential landlord to ensure you’ll have the flexibility to expand or adapt over time, and that any necessary consents are obtained at the outset.

6. Disputes Over Service Charges

If your landlord provides services such as common repairs or maintenance as part of your commercial lease, these costs will classify as service charges. They might include things like cleaning, security, and maintaining common areas. When a landlord isn’t transparent about such service charges, frustration and legal disputes can arise. It pays to be aware of all service charges before signing a lease, so you aren’t surprised by additional costs in the future. If your lease has a service charge it would be wise to request a copy of the annual budget up front.

Tips for Avoiding Commercial Lease Disputes

Don’t let fear of legal disputes stop you from growing your business. With the right knowledge, small businesses can successfully navigate commercial property leases. Every situation is different, but here are some general tips for avoiding legal issues:

• Meet With a Solicitor – Working with a solicitor specialising in commercial property is essential. They can break down complex language, explain your obligations, and ensure there are no unreasonable clauses. It may seem like an extra expense, but the investment can save you from future disputes and financial stress.
• Negotiate Terms – Before picking up the pen to sign a lease, consider negotiating the terms. You could request a neutral rent review mechanism or modify property use restrictions to match your needs.

Grow Your Business with Confidence

Understanding commercial property leases littered with jargon can feel impossible. But when you know the most common sources of disputes and have an experienced solicitor on your side, you can navigate the process with much more ease. At Gilson Gray, we work with small business owners across the UK and Scotland, ensuring they understand property leases before signing. Get in touch with us today to discuss your legal concerns.

Find out more about our Real Estate services here.