Why it is still worth taking care over a short-term lease

I have recently seen a couple of leases across my desk that reminded me of several key lessons I’ve shared before. These examples, which I’ve encountered first-hand, are worth revisiting – especially given how often short-term leases are wrongly perceived as low-risk.

What is meant by short-term lease?

Many tenants opt for short-term leases. By this, I mean leases of five years or less. In most cases, such leases are excluded from the Landlord and Tenant Act 1954 (the 1954 Act), which means the tenant has no automatic right to renew. The short-term nature often leads tenants to believe they are making a minimal commitment, but they should be cautious: they may be assuming long-term liabilities that far exceed the rent payable.

Specific scenario one

One particularly stark example involved a tenant who took a five-year lease excluded from the 1954 Act. Because it was a short-term arrangement, the tenant decided not to instruct solicitors. At the end of the term, the tenant remained in occupation, and the landlord’s solicitors issued a renewal lease in almost identical terms — the only apparent change being an agreed increase in rent. Trusting that nothing significant had changed, the tenant signed the lease without further review.

However, hidden within the terms was a full repairing covenant. More unusually, the lease also required the tenant to put the premises, including all landlord’s fixtures and fittings, into good and substantial repair and condition. Just a few months later, the landlord’s air conditioning system broke down. The tenant reported the issue, expecting it to be the landlord’s responsibility. But the landlord responded by thanking them for the notification and asking for the drawings and specifications for the repair, along with confirmation of when the works would be carried out.

The tenant was stunned. Surely it couldn’t be their responsibility to repair the landlord’s broken plant and machinery? Unfortunately, the lease said otherwise: “The Tenant shall put and keep the Property clean and tidy and in good and substantial repair and condition and shall keep all machinery and plant in the Property properly maintained and in good working order and condition.” This clause meant that even pre-existing disrepair, present before the lease began, became the tenant’s responsibility.

This is not a clause we would ever advise a tenant to accept without negotiation or, at the very least, suitable financial concessions such as a rent-free period or capital contribution. What the tenant saved on legal fees was quickly dwarfed by the cost of replacing the air conditioning system. And the sting won’t end there – with the tenant now fully responsible for condition, they face the prospect of significant dilapidations liability at the end of the term. The cost of not taking advice, in this case, was not just financial, it was structural.

Specific scenario two

In another case, a tenant held a separate lease of land which housed essential facilities for their main premises. This lease was also short-term and subject to repeated renewal on the same terms. This lease, however, included a right to break on the landlord’s part on 28 days’ notice, which would not leave enough time for the tenant to move the shear scope of the facilities kept there.

However, despite the critical nature of the facilities on the land, the tenant again believed that legal advice wasn’t necessary.

When the landlord exercised the break, the tenant had no time in which to find alternative premises or to develop a plan B. The loss of this land and the facilities on it, dramatically reduced the value of their main premises. So, whilst a great saving was made on legal fees at the outset, the loss of value of the main title was a thousand times the saving.

Short-term leases and service costs

Short-term leases also require scrutiny when it comes to service charges. Tenants should take care not to contribute to long-term costs, such as those recovered through sinking funds, which cover future major works they may never benefit from. It’s also vital to ensure that any service charge only relates to services that genuinely benefit the leased premises. Reviewing and negotiating these provisions at heads of terms stage can prevent unpleasant surprises later.

At Newmanor Law, we advise on scenarios such as these every day. Short-term leases can seem deceptively simple, but the risks can be substantial and long-lasting. We offer a truly fixed fee for reviewing and negotiating these leases, giving you certainty not just on legal costs, but on your exposure overall.

Our advice? Don’t wait until the air conditioning breaks, or the landlord serves notice, or something equally as common, foreseeable, or avoidable goes wrong – because by then, it may be too late. If you’re about to sign, or already in a lease that hasn’t been reviewed, now is the time to act. We’re here to help you avoid these costly mistakes with advice that’s practical, precise, and proportionate to the risk.