Lease considerations when opening a café in the UK

When we signed the lease for the Harbourside site, we read it. Or at least we thought we did. Our solicitor flagged a few things, we nodded, we asked about the rent and the term and the break clause, and we signed. Three years in, a surveyor's letter landed quoting £14,000 for roof works. The freeholder had walked away from his side of the building years before we arrived, and the "full repairing" clause we had glossed over meant the lot was now ours.

That was the moment I learned that a café lease is not a rental agreement. It is a 10 or 15 year promise to look after someone else's building, on their terms, in a market where they hold most of the cards. The rent is the headline number. Everything else is where the money actually goes.

This guide is the conversation I wish someone had forced me to have before I signed. It walks through the clauses that bite, what dilapidations look like on the way out, and where you still have room to push back.

Why this matters

A café lease is the single biggest financial commitment most operators will ever make. A 10 year lease at £40k a year is a £400k contract, before service charge, business rates, insurance, or the works you will be expected to fund yourself. If you sign a bad one, you cannot trade your way out. The clauses follow you.

Landlords' solicitors draft these documents to protect landlords. That is their job. Nobody is drafting it to protect you. The Landlord and Tenant Act 1954 gives commercial tenants some rights at renewal, but most of the clauses inside the lease itself are whatever the two parties agreed at the start. If you did not push back on something at the negotiation stage, it is in there for the duration.

The other reason this matters: most operators only learn what was in their lease when something goes wrong. A leak from the flat above. A rent review letter quoting an open market rent 30% above what you are paying. A dilapidations schedule when you try to leave. By then you are negotiating from the bottom of a hole.

The clauses that actually bite

There are six or seven parts of a standard commercial lease that, in my experience, are where the real cost and risk sit. The rent is not on the list, because the rent is the obvious bit. Everyone reads the rent.

Full Repairing and Insuring (FRI)

Most UK hospitality leases are FRI. This means you, the tenant, are responsible for keeping the property in good repair, and you reimburse the landlord for buildings insurance. "Good repair" sounds reasonable until you understand what it actually covers: the roof, the structure, the windows, the drains, the shopfront, the lot. If something was already in poor condition when you took the lease and you did not get a Schedule of Condition attached, you are on the hook to bring it up to standard.

This is what got us at Harbourside. The roof was tired when we signed. We had no schedule of condition. Three years in, a leak, a survey, and an invoice that landed on us because the lease said it was ours to fix.

The fix, before you sign:

• Commission a building survey. Not a valuation, a proper Schedule of Condition with photographs.
• Get the Schedule of Condition annexed to the lease and explicitly referenced in the repairing covenant.
• That way, your obligation is to return the property in no worse condition than it was when you took it. Not perfect. Not new.

Rent review provisions

Most leases over five years include a rent review, typically every five years. The two common types are open market review (rent is reset to whatever the market says it should be) and RPI or CPI linked (rent goes up by inflation). Open market is by far the more common in retail and hospitality.

Here is the catch. Most leases include an "upward only" clause. That means at review, the rent can go up or stay the same, but it cannot come down, even if the market has fallen. If you signed in 2019 at the top of the market and your review lands in 2024, you might be reviewed against 2024 comparables, but only if those are higher.

What to push for: a cap on the increase (5% or 10% over the previous rent), removal of the upward-only language, or an RPI link with a collar and a cap.

Break clauses

A break clause is your right to end the lease early, usually at year five of a ten year term. If you do not have one, you are committed for the full term. If your café is not working, you are still paying the rent until the end.

Break clauses are almost always conditional. Common conditions include: rent paid up to date, vacant possession given, all covenants complied with. That last one is a trap. "All covenants complied with" can mean any tiny breach, a peeling bit of paint, an outstanding repair, gives the landlord grounds to refuse the break. Push for the conditions to be limited to "material breaches" and "principal rent paid". And make a diary note six months before the break date, because most break clauses require six months' written notice.

Alienation: who you can sell or sub-let to

Alienation is the clause that controls whether you can assign the lease (sell it to a new tenant) or sub-let part of it. This matters enormously if you ever want to exit. A tight alienation clause means the landlord can refuse anyone they do not like the look of, which means you cannot sell, which means you keep paying the rent.

Look for: "landlord's consent not to be unreasonably withheld", an obligation for the landlord to respond within a set time (28 days is reasonable), and clarity on what conditions they can attach. An Authorised Guarantee Agreement (AGA) is standard, where you guarantee the new tenant's rent for the next tenancy, but anything beyond that is worth challenging.

Keep-open and permitted use

Keep-open clauses require you to trade during certain hours. They are more common in shopping centres and large schemes, less common in high street units, but they do appear. If you have one and you want to close on a Monday, or shut for two weeks in January, you are technically in breach.

Permitted use is the other one. The lease will specify what the unit can be used for, often very narrowly. "Use as a café within Class E" is one thing. "Use as a café selling hot drinks and light snacks, not to include the sale of alcohol or hot food cooked on the premises" is another. We had a permitted use clause at one site that nearly stopped us extending into evening trade. Get it as broad as you can: Class E covers most café and restaurant uses post-2020.

The schedule of dilapidations at exit

This is the part nobody warns you about. When your lease ends, the landlord's surveyor will turn up and produce a Schedule of Dilapidations: a list of everything that needs putting right to return the property to the condition required under the lease. Cracked tiles. Worn paintwork. Kitchen extraction needing service. The shopfront repainted. The flooring replaced.

The bill at the end of a ten year café lease can run to £30,000 or £50,000 quite easily. I have seen worse. The landlord can either require you to do the work, or pay them the equivalent in cash (a "terminal dilapidations claim").

How to protect yourself, in order of importance:

• Schedule of Condition at the start. I mentioned this above. It is the single most valuable document you can have when the dilapidations claim lands. Without it, you are arguing against the landlord's surveyor with nothing to point at.
• Keep maintenance records throughout the lease. Service records for the extraction, the boiler, the refrigeration. Receipts for repairs. Photos of the unit each year.
• Negotiate the exit standard. Try to get the lease to say you must return the property in the condition it was in at the start (with the Schedule of Condition), not in the condition specified by the full repairing covenant.
• Get a surveyor on your side six to twelve months before lease end. They can do the work cheaper than the landlord's contractor, and they will spot what the landlord is likely to claim for.

Negotiating: what you can actually push for

New operators often assume the lease terms are fixed. They are not. Landlords want the unit let, especially in a soft market or with a unit that has been empty. There is more room than people think, particularly on a first letting or after a void period.

The things worth pushing for:

• Rent-free period. Three to six months is standard for a new café fit-out. We got three at Harbourside, should have asked for six. Use it to cover the fit-out period when you are not yet trading.
• Capital contribution. A cash contribution from the landlord toward your fit-out, in exchange for taking the unit. Common in shopping centres and on longer leases. Worth asking for, especially if you are taking the unit in shell condition.
• Stepped rent. Start at a lower rent for years one and two, stepping up to the full rent in year three. Useful if you know the first year is going to be tight.
• Break clause at year five. Mutual or tenant-only. If they will not give you a break, push for a shorter term.
• Cap on service charge. If you are in a managed building or scheme, the service charge can be open-ended. A cap protects you.
• Cap on dilapidations. Harder to get, but worth asking. Some landlords will agree to a fixed cap on the terminal dilapidations claim.

The other thing to remember: heads of terms are not legally binding, but they set the frame for the whole negotiation. Get the heads of terms right before solicitors get involved, because once the lease drafting starts, every change costs money in legal fees on both sides.

Common mistakes

• Signing without a Schedule of Condition: This is the single most expensive mistake operators make. A few hundred pounds for a survey at the start can save tens of thousands at the end. Always commission one, always annex it.
• Not budgeting for the dilapidations exit: Operators run their café for ten years, then are shocked by a £40k claim on the way out. Set aside a small monthly amount from year one. Treat it as a fixed cost.
• Missing the break clause notice deadline: Six months' written notice is typical. Miss it and you are committed for another five years. Put it in your diary the day you sign.
• Accepting an upward-only rent review without a cap: This is industry standard but very negotiable, especially on a new letting. Push for a cap or an RPI collar.
• Not getting a hospitality-experienced solicitor: A general commercial property solicitor will not always spot the things that matter in a café context (extraction, grease traps, late-night licensing). Pay extra for someone who has done café leases before.
• Treating the lease as a rental agreement: It is not. It is a commercial contract that will follow you for a decade. Read every line. Ask about every clause. If your solicitor cannot explain something in plain English, find a better solicitor.