Office Space FAQ

Difference between Lease and Let

The Differences between Leasing and Renting Office Space in the UK

Office leasing and renting are two terms often used interchangeably to describe a business tenancy, although there are some important differences in how these workspace arrangements work and in their legal implications.

What is the Difference between Leasing and Renting Office Space?

An office lease agreement is a long-term or fixed-period contract. The duration of these contracts can be as long as 99 years although, in commercial properties, 7 to 10 years is the standard. More importantly, long lease duration creates a series of rights over the property in question. For example, this arrangement entitles the tenant to hold the exclusive possession of the space. This means that the occupier is free to determine who can access the property and under which circumstances, as well as make changes to the premises (renovations, alterations, etc.). Exclusive possession also allows the tenant to transfer the lease to a third party, although this usually requires the landlord's consent.

Exclusive possession is legally created either via contractual agreement or by registering the lease with the Land Registry. However, it's important to note that exclusive possession may or may not apply to other areas of the building, such as lifts, outdoor areas, walkways, etc.

Long-term commercial leases create duties and responsibilities on the tenant's side. Among those include the duty to perform repairs and maintenance work within the scope defined in the lease agreement.

On the other hand, an office rental agreement (sometimes referred to as a let) does not grant the tenant exclusive possession rights. These remain the prerogative of the landlord or owner. Another difference is that office rental agreements often cover a shorter period than leases. In the United Kingdom, the average office let duration is 3 years.

Office lets or rentals don't require the tenant to be responsible for the upkeep of the property, since the landlord carries out maintenance and repairs as needed. UK property law stipulates that landlords are obligated to do this maintenance if rental agreements are under 7 years. The obligation applies to both the interior and exterior of the property, as well as fixtures deemed essential to the functioning of the premises, such as boilers, heating, air conditioning, water and electrical supply, sanitation facilities, etc.

What is the Difference between a License and a Lease?

In many ways, a licence is similar to a rental or letting agreement. A licence authorises an individual or business to occupy the premises for a specific purpose, and unlike a lease, it doesn't grant the occupier exclusive possession rights. Licenses are short to medium-term occupancy schemes, lasting approximately 2 years, and may not be renewed at the end of the term unless otherwise agreed between tenant and landlord.

Licenses may be entered into via a written agreement, but this isn't always the case. By contrast, leases require the existence of a written contract. Unlike leases, licenses cannot be transferred, and the upkeep, maintenance, and repairs are the landlord's responsibility.

The Advantages of Leasing and Renting Office Space

- Lease agreements tend to involve lower monthly costs than rentals or lets. Because of their long duration, it's common for office leases to include a rent-free period.

- Leases favour those looking for certainty and security in their tenancy agreement.

- Office rentals have shorter notice periods and thus offer more flexibility.

- Renting (letting) may suit businesses that need to set up temporary operations or work on medium-term projects.

- Rentals eliminate the need to invest in repairs or maintenance work.

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