Industrial lease agreements

An industrial lease agreement is a form of commercial lease specifically designed for property used for industrial purposes, such as manufacturing facilities, warehouses, or distribution centres.

These agreements differ significantly from standard commercial leases, as they must accommodate specific requirements of businesses using heavy equipment, storage facilities, and logistics. The terms of an industrial lease often involve longer durations and specific clauses tailored to operational requirements, making it vital for both landlords and tenants to understand their obligations thoroughly.

Industrial leases often allow greater scope for negotiation than standard commercial leases, particularly in relation to property modifications, repairs, and rent adjustments, reflecting the specific nature of industrial activity. Careful drafting of an industrial lease is essential to ensure that the facilities and infrastructure meet the tenant’s operational needs while also addressing maintenance responsibilities and other key terms. Well-structured terms protect both landlord and tenant by balancing operational needs with long-term asset management.

What is an industrial lease agreement?

An industrial lease agreement is a legally binding contract between a landlord and a tenant for the rental of industrial property, such as factories, warehouses, or storage facilities. The agreement sets out the terms and conditions under which the tenant may occupy and use the property, including the rent, lease term, repair and maintenance obligations, and any permissions required for alterations or fit outs to accommodate the tenant’s business operations.

Unlike office or retail leases, industrial leases often contain provisions specific to industrial use, large areas and specific facility needs such as access to transportation hubs, responsibilities for health and safety compliance, planning and environmental regulations, and the installation of specialised machinery or storage systems, reflecting the operational requirements of the tenant while protecting the landlord’s interests. It’s essential that these terms are clearly defined to avoid misunderstandings about usage and liabilities.

What types of industrial leases are there?

Standard industrial lease agreement

A standard industrial lease agreement is a formal contract tailored to the use of industrial property, such as warehouses, factories, or distribution centres. In the UK, these are most commonly granted on a full repairing and insuring (FRI) basis, meaning the tenant is responsible for the repair and upkeep of the property and for reimbursing the landlord’s insurance costs.

Such agreements typically set out:

• Permitted use – restricting occupation to agreed industrial purposes.
• Alterations and fit out works – requiring landlord consent for modifications or installation of plant and machinery.
• Repair and maintenance – imposing obligations on the tenant to keep the property in repair and return them in good condition at lease end.
• Regulatory compliance – ensuring the tenant observes all health, safety, planning and environmental requirements.

FRI industrial leases are designed to support high-intensity use of property while allocating the majority of ongoing responsibilities to the tenant, giving landlords predictable asset management and tenants clarity over their operational obligations.

All-inclusive leases

In some industrial leases, the landlord retains responsibility for the majority of property-related costs, such as maintenance of the structure, insurance, and sometimes even utilities, with the tenant paying a single inclusive rent. This is sometimes referred to as an “all-inclusive rent” arrangement.

While less common for industrial premises in the UK than the full repairing and insuring (FRI) model, gross leases may be used for shorter-term lettings, managed estates, or where the landlord wishes to retain control over the upkeep of the property. For tenants, the main advantage is budget certainty, as most outgoings are included in the rent. For landlords, it provides greater oversight of the condition and management of the property, but also places more of the cost risk on them.

Full Repairing and Insuring (‘FRI’) Leases

A Full Repairing and Insuring (FRI) lease is the most common type of industrial lease in the UK. Under an FRI lease:

• Tenant responsibilities: The tenant pays rent and takes on most property obligations, including repairing the premises, maintaining fixtures, and reimbursing the landlord’s insurance. They may also contribute to estate-wide services through a service charge.
• Landlord responsibilities: The landlord retains ownership of the property and ensures it is insured. Their role is mainly supervisory, with minimal day-to-day maintenance duties.

Modified gross lease

A modified lease combines features of an all-inclusive rent arrangement and a full repairing and insuring (FRI) lease. The tenant pays rent along with certain specified costs, such as contributions to shared services or estate maintenance, while the landlord retains responsibility for other expenses.

Percentage lease

In a percentage lease (also called a turnover lease), the tenant pays a fixed base rent plus a percentage of their revenue once it exceeds a set threshold. While more common in retail, this structure can be used for industrial premises with high-revenue operations, allowing landlords to share in the tenant’s commercial success.

Expert assistance with industrial lease agreements

At Moore Barlow, we provide comprehensive legal guidance for drafting, reviewing, and negotiating industrial lease agreements. Our expertise ensures that each lease is tailored to the needs of the business, whether you’re a landlord leasing out industrial space or a tenant requiring customised facilities. We handle:

• Crafting clear, enforceable terms that cover all operational needs.
• Ensuring compliance with industry-specific regulations.
• Negotiating fair rent reviews and long-term lease provisions.

We work to minimise the risk of disputes while ensuring the agreement reflects the unique demands of industrial properties.

Why choose Moore Barlow for your industrial lease?

Our team has a deep understanding of the complexities involved in industrial leases. We offer bespoke advice that ensures your lease agreement is legally sound, practical, and suited to your business needs. We focus on providing clear, straightforward guidance that helps you avoid potential pitfalls while securing the terms that best support your operational goals.

Our approach is thorough, and we pride ourselves on anticipating potential issues, such as long-term maintenance and property modifications, that could arise over the course of the lease. We work closely with our clients to draft agreements that benefit both parties and ensure a smooth tenancy.