Explainer: The 2 Main Types Of Property Lease Agreements

Lease Agreements

If you need business premises, there are two types of rental agreements that you can explore with the property owner. If you need the business premises for a short term, you can explore a license agreement while if you need the premises in the long-term, you can go for a lease agreement.


Below, we will explore the two main types of lease agreements you can enter into with a property owner.


  1. Leasing a Property


Property leases typically run from 3 months up to 25 years and as such, they offer you more stability. However, data collected by researchers suggests that in the current property market, the average period for leasing business premises has shortened with most being below 8 years.


It is however worth noting that lease durations are not usually fixed and you can always negotiate the lease period with the property owner. Before putting up money for a lease, ensure that you carry out due diligence to ascertain the lease period written down in the lease contract.


Some of the other key areas that you should check out in the contract before penning your signature include:


  • The rent you will have to pay up
  • Clauses which may constitute to breach of contract
  • Extra service charges – Service charges refer to expenses attributed to things like heating and cleaning services. Check the contract to see what services you will be sharing with other tenants and the amount you will have to pay for the services. Remember that you can always negotiate the service charges in your lease agreement if you feel that they are unfavorable.
  • The amount that you will have to pay your landlord when your lease expires (Dilapidation)
  • The clauses on the maintenance that should be done within the interior and exterior of the property you are leasing


Remember that for leases, rent is typically paid in advance for each quarter. However, you can negotiate with the property owner so that you can pay rent in monthly installments. If you are leasing business premises to house a new enterprise, consider going for a short lease or ask your landlord to include a clause in the lease contract that stipulates the circumstances under which you can break the lease agreement.


  1. Licensing


If you are only looking to use business premises for a short period of time perhaps for a period of one year, a license agreement can be highly beneficial. License agreements are more flexible compared to leases since either party in the agreement can terminate the rental agreement at will. However, you should remember that a property owner has the right to deny the renewal of your rental license. To understand your rights when it comes to rental licenses, consider consulting a professional such as an attorney or chartered surveyor.


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