Buying an established business can offer significant advantages over starting from scratch. There may already be customers, staff, suppliers, equipment and an established trading history, but where that business operates from leased commercial premises there is another part of the transaction that deserves careful attention: the lease.
It can be easy for a buyer to focus on the value of the business itself and treat the premises simply as somewhere from which it trades, yet the lease can contain obligations, restrictions and financial commitments that continue to affect the business long after the acquisition has completed. Understanding those commitments before taking them on should therefore form an important part of the buyer's due diligence.
BSR Insight · Buying a business with premises
An established business may come with customers, staff and a trading history. Where it operates from leased premises, the lease can carry obligations, restrictions and costs that continue long after completion. It deserves the same scrutiny as the business itself.
The principle
A business may look attractive on turnover, profitability, assets and goodwill. But onerous repairing obligations, limited flexibility, unexpected costs or restrictions on use can materially affect the value of what the buyer is taking on. For a retailer, restaurant, salon or other location-dependent operator, the premises are often fundamental to the value of the business, so the property arrangements cannot be left to the end of the deal.
First question · how the premises transfer
Establish early which route applies. Where premises are central to the business, this is not an administrative detail to settle at the end.
The buyer takes over the existing lease. Landlord consent is usually required and may carry conditions, such as a rent deposit, a guarantor or an authorised guarantee agreement under which the outgoing tenant guarantees the buyer's performance. Consent cannot be unreasonably withheld or delayed, but it must be obtained before completion.
The landlord grants a fresh lease to the buyer, with terms open to negotiation rather than inherited. This is a chance to address break rights, term length and repairing liability at the outset, but the headline terms may differ from those the seller enjoyed.
The true cost of occupation
Rent is understandably the first figure a buyer considers, but several other charges shape the real cost of remaining in the property.
Contributions to the upkeep of common parts and the landlord's building insurance are typically recharged to the tenant, and can vary year to year.
Commercial leases are commonly reviewed at set intervals, often every five years. The basis of review determines how far the rent can rise during the term.
The biggest hidden liability
Depending on the wording, a tenant may take on substantial responsibility for the condition of the premises, both during the term and when the lease ends. A dilapidations claim on exit can run to tens, or in some cases hundreds, of thousands of pounds.
An FRI lease places responsibility for internal, external and structural repair on the tenant, potentially including items the tenant never damaged.
The tenant is responsible for the interior, while the landlord retains structural and external repair. The precise split turns on the exact lease wording.
A photographic record agreed at the outset can cap liability to the state of the premises when taken on, limiting exposure to pre-existing wear and defects.
A shifting rule · rent reviews
Buyers taking on an existing lease should check its rent review basis carefully. A ban on new upward-only reviews is coming, but it does not rewrite leases already in place.
Upward-only rent review clauses let rent rise or stay the same at each review, but never fall, even if the market has declined. They remain common in existing leases.
The English Devolution and Community Empowerment Act 2026 received Royal Assent on 29 April 2026, containing a ban on upward-only reviews in new business leases in England and Wales.
Commencement is expected around 2027 and the ban is not retrospective. A buyer taking an assignment of an existing lease still inherits its upward-only review.
When buying a business with leased premises, the lease shouldn't be treated as paperwork to deal with at the end. It can determine what the premises cost to occupy, what the new owner can do with them and what liabilities they may be taking on. Reviewing it early gives the buyer a much clearer picture of the business they are actually acquiring.
The takeaway
Understand the property commitment at the same time as the business opportunity. A commercial lease review before completion identifies the key obligations, restrictions and costs, giving the buyer a clearer view of what they are agreeing to before they take over.
This well-established B2B wholesaler specialises in cask ales, continental lagers, and craft cider, boasting exclusive access to a diverse range of products from renowned breweries.
Exeter high street pharmacy offers a prime opportunity in a suburban location, dispensing approximately 9,000 items per month.
LEASEHOLD
An established bar and restaurant manufacturer and fit-out contractor in Lancashire is available for acquisition, offering a unique opportunity for entry or expansion in the hospitality industry.
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