Plain-English definitions of UK commercial property, lease, tax and business rates terms.

1

1954 Act (Landlord and Tenant Act 1954)

Part II gives most business tenants security of tenure, meaning a right to renew their lease unless the landlord opposes on statutory grounds. It can be excluded by contracting out before the lease starts.

A

AGA (Authorised Guarantee Agreement)

Under the Landlord and Tenant (Covenants) Act 1995, an agreement by which an outgoing tenant guarantees the performance of the tenant they assign the lease to, for that next tenant only.

AIA (Annual Investment Allowance)

A 100% capital allowance on qualifying plant and machinery, up to 1,000,000 pounds a year for all businesses. It is a single annual limit shared across all qualifying spend, and does not cover cars.

Alienation

The lease provisions governing whether and how a tenant can deal with the lease, by assigning it, subletting, or sharing occupation. Consent is usually required and must not be unreasonably withheld.

Antecedent valuation date (AVD)

The date at which rental values are fixed for a business rates revaluation. For the rating list that took effect on 1 April 2026, the AVD is 1 April 2024.

B

BADR (Business Asset Disposal Relief)

A reduced Capital Gains Tax rate (18% from 6 April 2026) on qualifying business disposals, up to a lifetime limit. A commercial landlord letting property is usually an investor, so it rarely applies.

Break clause

A right for the landlord or tenant to end a lease early on a set date by serving notice. Breaks are strictly construed, and conditions such as vacant possession and rent paid must be met exactly.

C

Capital Goods Scheme

A VAT scheme that spreads and adjusts input VAT recovery on large property spends (broadly 250,000 pounds or more) over ten years, clawing recovery back or increasing it if the property's use changes.

CGT (Capital Gains Tax)

Tax on the gain when an individual sells commercial property, at 18% within the basic-rate band and 24% above it. Companies pay corporation tax on gains instead.

Contracting out

Excluding a business lease from the 1954 Act security of tenure, using a landlord's warning notice and a tenant declaration before the lease is entered into, so the lease ends with no right to renew.

Covenant (strength)

The financial standing of a tenant, which drives the security of the income and therefore the value and yield of an investment. A strong covenant on a long lease commands a keener yield.

CRAR (Commercial Rent Arrears Recovery)

A procedure to recover commercial rent arrears by taking control of the tenant's goods without a court order. From 1 May 2026 the Notice of Enforcement gives 14 clear days. Using CRAR waives the right to forfeit.

D

Dilapidations

Breaches of a tenant's obligations to repair, decorate and reinstate. Claims are capped by section 18 at the diminution in the value of the landlord's reversion.

Duty to manage (asbestos)

The duty under the Control of Asbestos Regulations 2012 on those in control of non-domestic premises to find, assess, record and manage any asbestos, usually via a survey, register and management plan.

Duty to notify (VOA)

A new business rates obligation, phased in from 1 April 2026 and mandatory for all ratepayers by 1 April 2029, to notify the Valuation Office Agency of changes to a property.

E

Easement

A property right over neighbouring land, such as a right of way or a right to run services, that runs with the land and binds future owners.

Electronic Communications Code

The legal framework governing agreements with telecoms operators for apparatus such as rooftop masts. Reforms since 2017 cut the rent site providers receive and strengthened operator rights.

Empty property rates

Business rates on a vacant property. After a rate-free window (three months, or six for industrial) the owner pays full rates. Reoccupation for 13 weeks resets the window.

EPC (Energy Performance Certificate)

A rating of a building's energy efficiency from A to G, valid for 10 years. For commercial property the minimum to let is E, in force since 1 April 2023.

ERV (Estimated Rental Value)

The open-market rent a property could achieve, used to work out the reversionary yield and the likely uplift at a rent review or renewal.

F

Forfeiture

The landlord's right to end a lease early for a tenant's breach, by peaceable re-entry for rent arrears or, for other breaches, after a section 146 notice. Accepting rent can waive the right.

FRI (Full Repairing and Insuring)

A lease where the tenant is responsible for all repairs, internal and structural, and the landlord insures the building and recovers the premium. The landlord-friendly standard for single lets.

Full expensing

A 100% first-year capital allowance for companies on new main-rate plant and machinery. It does not cover assets held for leasing, which is where the 40% first-year allowance comes in.

FYA (First-Year Allowance)

A capital allowance given in the year of expenditure. From 1 January 2026 a 40% FYA applies to new main-rate assets and, unlike full expensing, covers assets held for leasing and unincorporated businesses.

H

Heads of terms

The document setting out the commercial terms of a deal before lawyers draft the lease. Usually subject to contract, covering term, rent, reviews, repairs, break, alienation and use.

High-value multiplier

The business rates multiplier of 50.8p (2026/27) applied to properties with a rateable value of 500,000 or more, whatever their use.

I

ICR (Interest Cover Ratio)

A lender's affordability test: rent as a multiple of the interest, stress-tested at a notional rate. Commercial investment lending commonly wants 130% to 150%.

Integral features

Building systems such as lifts, heating, air conditioning, wiring and water systems, which qualify for special-rate capital allowances and are often missed without a fixtures survey.

IRI (Internal Repairing and Insuring)

A lease where the tenant repairs only the interior and the landlord keeps the structure and exterior, common in multi-let buildings with a service charge. The headline rent is usually higher.

L

LBTT (Land and Buildings Transaction Tax)

Scotland's transfer tax, replacing SDLT. Non-residential rates are 0% up to 150,000, 1% to 250,000 and 5% above, collected by Revenue Scotland.

LTT (Land Transaction Tax)

Wales's transfer tax, replacing SDLT. Non-residential rates run from 0% up to a 225,000 nil-rate band to a 6% top rate above 1,000,000, collected by the Welsh Revenue Authority.

M

MEES (Minimum Energy Efficiency Standards)

The rules setting the lowest EPC rating at which a property can lawfully be let. For commercial property the minimum is E, with a proposed EPC B by 2031 for buildings over 1,000 square metres.

Multiplier

The pence-in-the-pound figure multiplied by a property's rateable value to give the business rates bill. The 2026/27 system has five multipliers by rateable value and use class.

N

NIY (Net Initial Yield)

The net income of a property expressed as a percentage of the gross purchase price (price plus purchaser's costs). The standard measure for valuing commercial investment.

Non-Resident Landlord Scheme

The regime under which a tenant or agent may deduct basic-rate tax from rent paid to an overseas landlord, unless the landlord is approved to receive rent gross.

NPV (Net Present Value of rent)

The total rent over a lease term discounted at 3.5% a year, used to calculate the SDLT charge on the rent of a new commercial lease.

O

Option to tax (OTT)

A landlord's election to make an otherwise VAT-exempt property standard-rated, so 20% VAT is charged on rent and sale but input VAT can be recovered. Binding for 20 years, with a 6-month cooling-off.

P

Passing rent

The rent currently being paid under a lease, as distinct from the estimated rental value or market rent.

Peaceable re-entry

Forfeiting a lease for rent arrears by physically re-entering the empty premises and changing the locks, without a court order. No section 146 notice is needed for non-payment of rent.

Permitted development

Changes that can be made without a full planning application, often subject to prior approval, such as converting commercial (Class E) space to residential.

Pool Re

The government-backed reinsurance scheme that keeps terrorism insurance available for commercial property in the UK.

R

Rateable value (RV)

The Valuation Office Agency's estimate of the annual rent a property could have been let for at the valuation date. Multiplied by the multiplier to give the business rates bill.

REIT (Real Estate Investment Trust)

A listed, tax-efficient company that owns and lets property. Broadly exempt from corporation tax on rental income if it distributes most of it, with tax falling on investors via property income distributions.

Rent review

A lease mechanism for adjusting the rent during the term, commonly open-market (often upward-only), index-linked (RPI or CPI), stepped, or turnover-based.

Reversion

The landlord's interest in the property, and the right to possession when the lease ends. Its value underpins the section 18 dilapidations cap.

Reversionary yield

The yield if the rent rose to the estimated rental value at the next review or renewal, expressed against the gross purchase price.

RHL relief

Lower business rates multipliers (38.2p and 43.0p in 2026/27) for eligible retail, hospitality and leisure property below 500,000 rateable value, replacing the temporary relief scheme.

Rights of light

A right for a building to receive natural light through defined windows, which can be acquired over time and can block or shrink a neighbouring development.

S

SBA (Structures and Buildings Allowance)

A 3% straight-line capital allowance over 33 and one third years on the cost of constructing or acquiring non-residential buildings. Amounts claimed reduce the CGT base cost.

SBRR (Small Business Rate Relief)

Relief for occupied property: 100% at a rateable value of 12,000 or below, tapering to zero at 15,000. It is the occupier's relief and does not apply to empty property.

Schedule of condition

A record, usually with photographs, of a property's state at the start of a lease. Where the lease refers to it, it caps the tenant's repairing obligation at that condition.

SDLT (Stamp Duty Land Tax)

The transfer tax in England and Northern Ireland. Non-residential rates are 0% up to 150,000, 2% to 250,000 and 5% above, with no additional-property surcharge.

Section 18 cap

Section 18(1) of the Landlord and Tenant Act 1927, which caps dilapidations damages at the diminution in the value of the landlord's reversion, and can bar a claim where the property will be redeveloped.

Section 25 notice

The landlord's notice under the 1954 Act to end or renew a business tenancy, served between 6 and 12 months before the termination date, either proposing a new tenancy or opposing renewal.

Section 26 notice

The tenant's request under the 1954 Act for a new tenancy. The landlord must serve a counter-notice within two months to oppose renewal.

Service charge

The mechanism by which a landlord recovers the cost of running and maintaining the common and structural parts of a multi-let building, governed by the lease and the RICS code.

Sinking fund

A fund built up through the service charge over time towards a major future item of capital expenditure, such as replacing a roof. It must be permitted by the lease and held on trust.

SIPP (Self-Invested Personal Pension)

A personal pension that can hold commercial property, with rent received tax-free and no CGT on disposal within the scheme. Residential property is effectively off limits.

SSAS (Small Self-Administered Scheme)

An occupational pension, usually for company directors, that can hold commercial property and, unlike a SIPP, make a loanback to the sponsoring employer.

Sui generis

A planning use that sits outside the use classes, such as a pub, takeaway or cinema. Moving to or from a sui generis use usually needs planning permission.

T

TOGC (Transfer of a Going Concern)

The sale of a tenanted commercial property as a business rather than just a building, which can be free of VAT if strict conditions are met, including the buyer opting to tax.

Turnover rent

Rent linked to a percentage of the tenant's sales, common in retail and leisure, often on top of a lower base rent.

U

Upward-only rent review

A review where the rent cannot fall below the passing rent. A ban is legislated in the Act 2026 but not yet in force, and is not retrospective.

Use Class E

The broad commercial, business and service use class introduced in 2020. Switching between uses within Class E generally does not need planning permission.

V

VOA (Valuation Office Agency)

The government body that sets rateable values for business rates in England and Wales and runs the Check, Challenge, Appeal process.

W

Wayleave

Usually a personal, often terminable agreement allowing apparatus such as cables or pipes to cross land, commonly used by utility and telecoms companies for a payment.

Y

Yield

A property's income as a percentage of its price or value. A lower yield means a higher price per pound of income and reflects lower perceived risk.