Agreements for Lease UK: Pre-Let Contracts Explained

What this document is

An agreement for lease is a contract that commits two parties to enter into a lease at a future date, usually once certain conditions have been met. It is not the lease itself. Until the conditions are satisfied and the lease is formally completed, the tenant has no right to go in and occupy the premises.

What they do have is a legally binding promise from the landlord that a lease on agreed terms will be granted when the trigger events happen. The form of the lease is normally annexed to the agreement so there is no ambiguity about what will eventually be signed.

These arrangements are common where a landlord is redeveloping a site, refurbishing an existing building, or waiting for an outgoing tenant to vacate. They also crop up where planning permission, superior landlord consent, or a change of use is still outstanding.

Because the obligations are reciprocal, both sides benefit from knowing where they stand well before the keys physically change hands.

How to use this document

1. Agree the commercial terms first. Before drafting starts, both sides need to settle rent, term length, break rights, rent-free periods, service charge treatment, repair obligations and any tenant incentives. Getting these nailed down in a heads of terms document saves considerable legal cost and avoids drafting the same clause three times. 2. Draft the lease and annex it to the agreement. The lease that will eventually be completed should be prepared in agreed form and attached as a schedule to the agreement for lease. This means nobody can argue later about what terms apply. Any side letters, rent deposit deeds or guarantor documents should also be in agreed form and attached. 3. Identify and draft the conditions. The agreement needs to set out clearly what has to happen before completion is triggered. This might be practical completion of works to a defined specification, the grant of planning permission, vacant possession from an existing occupier, or superior landlord consent. Each condition needs a definition, a longstop date and a mechanism for what happens if it fails. 4. Deal with construction and access issues. If the landlord is building or refurbishing, the agreement typically includes a works specification, an inspection regime, a snagging process and a certificate mechanism confirming when practical completion has been achieved. Tenants will often want rights of early access to carry out their own fit-out before the lease formally starts. 5. Complete the lease when conditions are met. Once the trigger events have occurred and any certificates issued, the parties complete the lease on the agreed form. The term then runs from the completion date (or another agreed date), and the agreement for lease falls away, having done its job.