Development clauses in Commercial Leases

An owner of a local bookstore was very surprised when their landlord gave them notice to terminate their lease as the building was being redeveloped into apartments.

Development clauses in leases are becoming more popular in commercial leases and are used by landlords to improve the rental potential and value of their assets. 

These clauses benefit landlords as it means they can give a tenant notice to terminate rather than having to wait for the lease term to end before commencing work on the building. 

These clauses are also commonly used when seismic strengthening works to a building may be required, or to give landlords a right to convert the use of the building. 

Development clauses are not particularly attractive to tenants as they create a lot of uncertainty. Tenants may have to unexpectedly wind down their business and find somewhere else to trade. 

When acting for tenants we generally recommend removal of these clauses. If a landlord insists on retaining a development clause, we recommend restricting the period when it is applicable (e.g. only in the final lease term rather than in the initial term), or requiring the landlord to relocate the tenant to another suitable premise at their cost.  

We recommend you take advice before you sign a deed of lease as many bespoke commercial leases now include development clauses.

Leading law firms committed to helping clients cost-effectively will have a range of fixed-price Initial Consultations to suit most people’s needs in quickly learning what their options are.  At Rainey Collins we have an experienced team who can answer your questions and put you on the right track.