What Should You Know Before Signing a Commercial Lease in Solihull?

Key Points

● Commercial leases are detailed, long-running legal documents. The terms you agree at the outset will govern your business for years, which is why taking legal advice before you sign is worth every penny.

● Security of tenure under the Landlord and Tenant Act 1954 gives most business tenants a statutory right to renew their lease at the end of the term, but this right can be contracted out of, and many landlords will try to do so.

● Full repairing and insuring leases place the entire cost of repairs, maintenance, and building insurance on the tenant, including liability for pre-existing defects, unless a schedule of condition is agreed before the lease starts.

● Dilapidations claims at the end of a lease can run to significant sums. Managing repairing obligations throughout the term, not only in the final months, is the most effective way to limit your exposure.

● The Government is proposing to prohibit upward-only rent review clauses in new commercial leases through the English Devolution and Community Empowerment Bill, though this reform has not yet passed into law.

Solihull is one of the most active commercial locations in the West Midlands. In November 2024, Solihull Council and Muse signed a Development Agreement to regenerate Mell Square. Plans approved in February 2026 will see the area, to be renamed Holbeche Place, transformed with up to 1,600 new homes, more than 600,000 square feet of commercial space, a hotel, and new public spaces, with construction due to begin in 2026. For small business owners, that creates genuine commercial opportunity.

There is no standard template for a commercial lease and no equivalent of consumer tenancy legislation to cap what a landlord can ask of you. Getting the legal detail right at the outset is what separates a lease that works for your business from one that does not.

Before You Sign Anything

The process of agreeing a commercial lease usually begins with heads of terms: a document setting out the key commercial points before the formal lease is drafted. Heads of terms typically cover the rent, the lease length, any break clauses, the repairing obligations, and the permitted use of the property. They are not legally binding, but they set the framework for everything that follows, which is why instructing a solicitor at this stage, rather than after, puts you in a much stronger position.

Most commercial leases in Solihull, as across England and Wales, are granted for a fixed term. The average length is around six years, though this varies considerably by sector and property type. Shorter terms offer flexibility; longer terms provide security and, in many cases, a better initial rent. The right balance depends on your business plans and risk appetite.

Before instructing a solicitor to review the draft lease, carry out basic due diligence on the property itself. Check the planning use class to confirm the property is authorised for your intended business activity. Obtain a survey to understand the building's condition, particularly if you are taking on full repairing obligations. Confirm there are no outstanding planning enforcement notices or disputes with the landlord's title. These steps are routine but easily skipped when you are eager to secure premises.

Security of Tenure

One of the most significant protections available to commercial tenants in England and Wales is security of tenure, governed by Part II of the Landlord and Tenant Act 1954. If your lease is protected by the Act, your tenancy will not automatically end when the contractual term expires. You have a statutory right to remain in occupation and to apply to the court for a new lease on broadly similar terms. For any business whose premises are closely tied to customer relationships or brand identity, this continuity can be invaluable.

The protection applies where you occupy premises for business purposes and the tenancy runs for more than six months. A landlord can only refuse a new lease on specific statutory grounds set out in Section 30(1) of the Act. These include persistent failure to pay rent, breach of repairing obligations, or a genuine intention by the landlord to redevelop the property or occupy it for their own use.

Security of tenure can be excluded. A landlord can ask a tenant to contract out of the Act before the lease is granted, and many do. The contracting-out procedure requires the landlord to serve a formal warning notice, and the tenant must then make either a simple declaration or a statutory declaration confirming they understand the rights they are giving up. If you are presented with a contracted-out lease, treat that seriously. When your term ends, the landlord has no legal obligation to offer you a new one, and you will have no right to compensation unless you have expressly negotiated for it.

For businesses looking at space in the new Holbeche Place development, or any other new commercial scheme in the Solihull area, scrutinise whether security of tenure will be included or excluded. Developers and institutional landlords frequently seek to contract out of the Act's protections, particularly in high-demand locations where they want to retain flexibility over occupancy in the medium term.

Full Repairing and Insuring Leases

The majority of commercial leases granted in England and Wales, particularly for self-contained premises, are on a full repairing and insuring basis, known as an FRI lease. Under this arrangement, the tenant is responsible for keeping the entire property in good repair and for meeting the cost of building insurance, either by arranging it directly or by reimbursing the landlord for the premium.

For a standalone unit, this can mean responsibility for the roof, structural walls, drainage, and all mechanical and electrical plant, in addition to the interior. For a unit within a multi-let building, the position is usually modified so that the tenant looks after the interior of their space and contributes to the cost of maintaining shared parts through a service charge. Either way, the financial exposure can be significant, and it frequently catches tenants off guard.

A point that surprises many new commercial tenants is the standard of repair that most FRI leases impose. The typical obligation is to keep the property in 'good and substantial repair and condition'. Courts have interpreted the word 'keep' to mean 'put and keep', which means that if the property was in a poor state when you took the lease, you may still be obliged to remedy pre-existing defects at your own cost. The only reliable protection against this is a schedule of condition: a photographic and written record of the property's state at the start of the term, which limits your repairing obligation to returning it in no worse condition than documented.

A schedule of condition is not something landlords routinely offer. You need to request it, negotiate its inclusion, and ensure it is properly appended to and referenced within the lease. Getting this right at the outset can save a very large sum when you come to leave.

Dilapidations

Consider what happens when you hand back the keys at the end of your lease. A few weeks later, a lengthy document arrives from the landlord's surveyor setting out alleged breaches of your repairing obligations and a bill that could run to tens of thousands of pounds. That document is a schedule of dilapidations, and it is one of the most common sources of serious financial disputes between commercial landlords and outgoing tenants in England and Wales.

Dilapidations describes a tenant's breaches of their repairing, decorating, and reinstatement obligations under a lease. Claims can arise during the tenancy (interim dilapidations) or, far more commonly, at the end of it (terminal dilapidations). Common items include failure to redecorate at the intervals required by the lease, not reinstating alterations made during the tenancy, and allowing mechanical plant to fall into disrepair.

There are legal limits on what a landlord can recover. Section 18(1) of the Landlord and Tenant Act 1927 provides a statutory cap: the landlord cannot recover more than the amount by which the disrepair has reduced the value of their interest in the property. If the landlord intends to demolish or substantially alter the building regardless of its condition, this can reduce the claim considerably. These arguments require evidence and, often, expert valuation input.

● Manage repairing obligations throughout the tenancy, not just at the end of it.

● Obtain a schedule of condition before entering the lease and ensure it is attached to the lease document.

● Keep records of all maintenance and repair works carried out during the tenancy.

● Seek the landlord's consent in writing before making any alterations to the property.

● Redecorate at the intervals specified in the lease, not just when it seems necessary.

● Take legal advice at least twelve months before the end of the lease to review your repairing position.

Rent Reviews

Commercial leases for terms of more than five years almost always contain rent review provisions, allowing the rent to be adjusted at set intervals, typically every three to five years, to reflect current market conditions. For most of the last four decades, those reviews in England and Wales have operated on an upward-only basis: at review, rent can rise or stay the same, but it cannot fall, even when market rents for comparable properties have declined.

Upward-only rent reviews have long attracted criticism for placing small business tenants at a disadvantage, particularly during economic downturns when falling market rents offer no corresponding relief from contractual increases. This imbalance has contributed to high vacancy rates seen on high streets across the country, including many town centres in the West Midlands.

A significant proposed change is currently working its way through Parliament. On 10 July 2025, the Government introduced the English Devolution and Community Empowerment Bill, which seeks to prohibit upward-only rent review clauses in new commercial leases. If enacted, rent could go up or down at review in line with actual market conditions. The prohibition would apply to all new commercial leases and renewal leases granted for business purposes. Existing leases would be unaffected.

At the time of writing, the Bill has not passed into law. The reform is contested in the investment and property finance markets, where upward-only reviews have traditionally supported property valuations and provided income predictability for lenders. Opponents argue that removing this feature could make commercial property harder to finance and, in some cases, reduce the supply of available space.

For small business owners taking a new lease in Solihull now, current law still allows upward-only reviews. Negotiating carefully at heads of terms stage matters. Options worth pursuing include a review mechanism linked to the Consumer Price Index rather than open market value, a cap on the percentage increase permitted at each review, or a genuine open market review that allows rents to move in either direction. A commercial property solicitor can advise on what is achievable for the property type and the current state of the local market.

Change of Use

Many small business owners assume they can trade from a commercial property however they choose once the lease is signed. That assumption can be costly. Every commercial property in England and Wales has a lawful planning use, determined by the use classes system under the Town and Country Planning (Use Classes) Order 1987 (as amended). Operating your business in a way that does not match the property's authorised use risks enforcement action from the local planning authority, which can require you to stop trading from the premises.

In 2020, the Government consolidated a wide range of retail, office, and service uses into a single, broad Class E. This means that many changes of use within that class, such as converting a retail shop to a café, or an office to a gym, no longer require a formal planning application. Small business owners have considerably more flexibility than previously, particularly in town centre locations where traditional retail has faced pressure.

Class E does not cover every type of business. Pubs and bars sit in the Sui Generis category, hot food takeaways fall under a separate class, and industrial and residential uses each require their own planning permission when changing from another class. Even within Class E, a property in a conservation area or a listed building, or one subject to a planning condition restricting its range of uses, may require consent before the use changes. Solihull town centre has areas with specific planning policies that could affect what a given unit may lawfully be used for.

Change of use in a leased property also requires the landlord's consent, separate from any planning permission. Most commercial leases contain a 'permitted use' clause specifying the purposes for which the property may be used. Operating outside that clause is a breach of the lease and can trigger the landlord's right to forfeit. Even where planning law permits your intended use, you still need to check the lease and obtain landlord's consent where required.

If you are considering space in the new Holbeche Place development, check carefully what use the planning consent will allow for each unit. In a large mixed-use scheme, different units can carry different use conditions depending on the design of the wider masterplan and any conditions attached to the planning permission. This is the kind of detail that a solicitor reviewing the draft lease will identify before you are committed.

Break Clauses and Lease Flexibility

Commercial leases can feel weighted in the landlord's favour, and in certain respects they are. The landlord's income is secured; the tenant carries most of the financial risk if trading conditions change. A tenant break clause is one of the main tools for rebalancing that position. It gives you the right to end the lease before the contractual expiry date, provided you serve the correct notice and meet any conditions attached to the clause.

Break clauses must be negotiated; they do not appear in leases automatically. Landlords will often resist granting them, particularly at short intervals, because a vacant property is both a cost and an income risk. The usual compromise is a break after a minimum period, for example after the third year of a five-year lease, on six months' written notice.

The conditions attached to exercising a break clause are where problems most often arise. Some leases require the tenant to have paid all sums due and to give up vacant possession, meaning the property must be fully vacated with no sub-tenants in place. The RICS Code for Leasing Business Premises 2020 recommends that break conditions be limited to payment of basic rent, giving up occupation, and leaving no sub-tenants. Not all landlords follow this guidance. A break clause that looks generous on paper can become practically impossible to exercise if the conditions are drawn too broadly, and legal advice before signing is the reliable way to identify that risk.

A Practical Checklist for Solihull Tenants

Solihull's commercial rental market is active, and in a market where good properties attract real competition, the temptation is to move quickly and deal with the legal detail later. Once heads of terms are signed, both parties expect the transaction to proceed on those terms, and changes become harder to secure. Taking legal advice before heads of terms are agreed puts you in a position where you can negotiate from knowledge.

The following steps provide a practical framework for any business tenant approaching a lease in the Solihull area:

● Check the planning use class of the property and confirm it matches your intended business activity before committing to any costs.

● Instruct a solicitor to review or advise on heads of terms before they are signed.

● Commission an independent building survey, especially if the lease is on an FRI basis.

● Negotiate a schedule of condition to limit your repairing liability from the start.

● Establish whether the lease is protected by the Landlord and Tenant Act 1954 or contracted out of it.

● Examine the rent review mechanism: how often, on what basis, and whether an upward-only restriction applies.

● Check whether a break clause is available and what conditions attach to exercising it.

● Understand the full scope of your repairing and insuring obligations, including the treatment of any alterations you make during the tenancy.

The law in England and Wales

The principal statutes governing commercial leases in England and Wales are the Landlord and Tenant Act 1954, which governs security of tenure and lease renewals; the Landlord and Tenant Act 1927, which includes the Section 18 cap on dilapidations damages; and the Landlord and Tenant Act 1988, which imposes a duty on landlords to respond promptly to applications for consent to assign or sublet. The Town and Country Planning (Use Classes) Order 1987, as amended in 2020, governs the use class system.

The RICS Code for Leasing Business Premises 2020 sets out best practice guidance for landlords and tenants across England and Wales. The Code is not legally binding, but it is widely regarded as reflecting fair dealing in commercial lease negotiations. A landlord who departs from its recommendations without good reason is worth questioning.

The English Devolution and Community Empowerment Bill, introduced on 10th July 2025 and progressing through Parliament, contains the proposed prohibition on upward-only rent review clauses. Tenants entering new leases before this reform is enacted will remain subject to current law. There is no confirmed commencement date, and the Bill's provisions may still be amended.

Looking Ahead in Solihull

The regeneration of Mell Square into Holbeche Place is one of the most significant changes to Solihull's commercial property offer in a generation. The scheme, valued at around £350 million and delivered by Muse in partnership with Solihull Council, will bring a substantial increase in commercial space to the town centre alongside a resident population of up to 1,600 new households within walking distance of those units. Phase one alone is set to deliver 346 apartments alongside new commercial space and improved public areas.

For small business owners, a development of this scale creates genuine commercial opportunities. The local market will also shift as a result. Rents and lease terms in the wider town centre will be influenced by what Holbeche Place introduces, and existing landlords may respond to new competition in different ways. The outcome for any individual business depends on the strength of their negotiating position and the quality of their legal advice.

High-street rental auctions, introduced under the Levelling-Up and Regeneration Act 2022, also give Solihull Council the power to let long-vacant properties through short-term lease arrangements. For small businesses that would otherwise struggle to access well-positioned town centre space, this is a route worth knowing about.

Frequently Asked Questions

Does my commercial lease have to be protected by the Landlord and Tenant Act 1954?

No, security of tenure can be excluded by agreement. If the landlord has followed the correct contracting-out procedure and you have signed the required declaration, your lease will not benefit from the Act's protections. You will have no statutory right to a new lease when your term ends. Always check whether a proposed lease is inside or outside the Act before agreeing to proceed.

What is a schedule of condition and do I need one?

A schedule of condition is a document, usually supported by photographs, recording the state of the property at the start of the lease. It limits your repairing obligation so that you need only return the property in the condition shown, rather than in perfect repair. If you are taking an FRI lease of a property that has any existing wear or defects, it is one of the most important protections you can negotiate. Without one, you may find yourself paying to remedy defects that existed before you moved in.

Can I change how I use the property once I have the lease?

It depends on the lease and the planning position. Your lease will contain a permitted use clause, and operating outside it is a breach. In addition, if your proposed change of use moves the property from one planning use class to another and that move is not permitted development, you will need planning permission from Solihull Metropolitan Borough Council. Some changes within Class E do not require a planning application, but local restrictions may still apply. Check both the lease and the planning position before changing how you use the property.

How are rent reviews typically calculated in a commercial lease?

Most commercial leases in England and Wales use an open market value basis for rent review, resetting the rent to what a willing tenant would pay for a comparable property at the review date. Many current leases also include an upward-only clause, meaning the rent cannot fall even when market values have dropped. The Government is proposing to prohibit upward-only rent review clauses in new leases through the English Devolution and Community Empowerment Bill, but this has not yet become law.

What happens if I leave the property in poor condition at the end of my lease?

Your landlord can serve a schedule of dilapidations setting out the alleged breaches and the estimated cost of remedying them. If you do not carry out the works or agree a financial settlement, the landlord can pursue a damages claim. The recoverable amount is subject to the cap in Section 18(1) of the Landlord and Tenant Act 1927, which limits damages to the reduction in value of the landlord's interest caused by the breach. Managing your repairing obligations during the tenancy and taking legal advice well before the lease ends will produce a far better outcome than addressing the issue only when the schedule arrives.

Speak to Pearcelegal

Pearcelegal has a dedicated team of commercial property solicitors based in Solihull, advising businesses across the West Midlands on commercial leases, property transactions, and all aspects of commercial property law. Whether you are taking your first commercial lease, renewing an existing one, dealing with a dilapidations dispute, or looking at the opportunities emerging from the Holbeche Place development, we can help you understand your legal position and negotiate terms that protect your business.

To make an appointment, please contact us on 0121 270 2700 or enquire through our contact form at https://pearcelegal.co.uk/contact.