Shop lease agreements

A shop lease agreement is a specialised contract that allows a business to occupy retail space for a specified period in exchange for rent.

This type of lease is common for businesses such as boutiques, restaurants, and other retail outlets, and it often includes specific provisions that cater to the retail environment. A well-drafted shop lease agreement outlines not only the rent but also terms around trading hours, the permitted use of the property, alterations, assignability and how common areas may be shared with other tenants.

Entering into a shop lease is a major commitment for any business, as the location and conditions of the lease can directly impact business operations. For landlords, a detailed lease ensures a reliable income stream while protecting their property. Both parties must understand the terms before signing, as the agreement will govern the tenant’s use of the space and the landlord’s responsibilities throughout the tenancy.

What makes a shop lease different?

A shop lease agreement focuses specifically on the retail sector, where tenants require flexibility to run their businesses effectively. Unlike general commercial leases, shop leases may include terms that address key retail considerations, such as how signage can be used, restrictions on certain business types within the same premises, and conditions around renovations or fit-outs. Retail tenants may also be subject to specific trading hours, which will be clearly outlined in the lease.

Shop leases are often longer-term agreements, but they may include break clauses or rent review clauses that allow both the landlord and the tenant to renegotiate terms at specific points during the lease period. Additionally, these agreements must be tailored to the retail environment, where shared spaces like car parks and walkways are common and need clear guidelines around usage and maintenance.

What are the different types of office leases?

Full-service (Gross) lease

A full-service or gross lease is where the tenant pays a single, all-inclusive rent amount. This covers rent as well as operating expenses like property taxes, insurance, and utilities, which are managed and paid by the landlord. This lease type is popular in multi-tenant office buildings, as it offers tenants predictable monthly costs without responsibility for managing additional expenses.

Modified Gross lease

In a modified gross lease, the tenant pays a base rent along with certain agreed-upon operating expenses, such as utilities or maintenance fees, while the landlord covers the rest. This arrangement provides flexibility, allowing the tenant to share some costs without bearing full responsibility. Modified gross leases are ideal for tenants who want some control over expenses without the complexity of a net lease.

Triple Net (NNN) lease

A triple net (NNN) lease requires the tenant to pay rent plus all property expenses, including taxes, insurance, and maintenance. While the base rent is typically lower than in a gross lease, the tenant is responsible for managing operating costs. Triple net leases are common in standalone office spaces or buildings with single tenants, as they allow landlords to minimise their operational duties.

Double Net (NN) lease

Under a double net (NN) lease, the tenant covers rent, property taxes, and insurance, while the landlord remains responsible for maintenance costs. This type of lease offers a balanced approach, transferring some expenses to the tenant while the landlord retains control over property upkeep. Double net leases are often found in smaller office buildings or spaces within larger complexes.

Single Net lease

A single net lease is a simpler arrangement in which the tenant pays base rent and property taxes, with the landlord covering maintenance and insurance costs. This lease type offers a lighter financial burden for tenants compared to other net leases, while still allowing landlords to pass some costs to the tenant.

Percentage lease

In a percentage lease, the tenant pays a base rent plus a percentage of their revenue, typically over a certain threshold. Though more common in retail, some office spaces with high-revenue businesses may use this model. This type of lease aligns landlord and tenant interests, as both benefit when the tenant’s business performs well.

Short-term or flexible lease

A short-term or flexible lease offers tenants a temporary arrangement, usually under one year, allowing flexibility for companies needing quick or short-term space solutions. These leases can be structured as gross, modified gross, or net leases, depending on the terms, and are ideal for startups or businesses testing new markets.

Each lease type addresses different tenant and landlord needs and requirements, providing a range of options for cost-sharing, flexibility, and financial responsibility in office space rentals.

Comprehensive legal support for shop leases

At Moore Barlow, we understand the unique demands of shop lease agreements and provide tailored legal advice for both landlords and tenants. We ensure your lease includes:

• Terms that allow for operational flexibility, like fit-out provisions and clear trading hours.
• Rent review clauses to protect against market fluctuations.
• Guidelines on shared areas, including car parks and communal facilities, ensuring clarity on responsibilities for upkeep.

Whether you’re negotiating a new lease or reviewing the terms of an existing one, we provide the expertise to ensure the agreement meets your business needs and complies with legal requirements.

Our commitment to your retail success

At Moore Barlow, we bring years of experience in drafting and reviewing shop lease agreements, ensuring that every detail is aligned with your retail business objectives. We understand that location and lease terms are crucial to success in the retail sector, and our goal is to protect your interests, minimise risks, and provide you with a solid foundation for growth.

By focusing on the unique challenges of retail leases—such as foot traffic, signage, and flexible use of the premises—we ensure the terms of your lease allow for a productive and profitable tenancy.