In the world of commercial real estate, transactions are rarely concluded overnight.
Major lettings, particularly in development projects, require complex negotiation. This is where an Agreement for Lease (“AfL”) becomes an essential tool in managing risk and aligning expectations between landlords and tenants before a formal lease is granted.
In this article, we explore what an Agreement for Lease is, why it is used, and when it may be necessary for your commercial property development or leasing strategy.
What Is an Agreement for Lease?
An Agreement for Lease is a legally binding document between a landlord and a prospective tenant that sets out the terms and conditions upon which the landlord agrees to grant, and the tenant agrees to take, a lease at a future date.
In essence, it acts as a promise to enter into a formal lease in the future, subject to the satisfaction of certain conditions. The agreement outlines those conditions, the proposed lease terms, and the steps that must be taken by both parties before the lease can be completed.
Why Use an Agreement for Lease?
An Agreement for Lease provides clarity and commitment at a stage when not all elements of a lease are yet deliverable. For example, it may be used where:
- the premises have not yet been constructed or require significant works
- planning permission or third-party consents need to be obtained
- either party needs to satisfy financial, legal, or technical conditions
- the lease needs to start at a specific future date tied to a development timetable.
An AfL assists both parties in managing risk, as the landlord secures a committed tenant and the tenant gains assurance of occupation that meets its specific requirements.
Pre-Letting in Development Projects
Typically, an Agreement for Lease is used in the context of pre-letting space in a development – whether that is a logistics warehouse, office block, or retail unit.
A developer may agree to construct a bespoke property for a tenant, and the AfL will set out the construction obligations, specifications, and timelines, with completion of the lease made contingent upon practical completion of the works.
Conditional Planning or Consent
If a landlord needs to obtain planning permission or other consents before they can let the premises, an Agreement for Lease provides the landlord with time to secure those approvals whilst committing the tenant to proceed if the relevant conditions are satisfied.
Tenant Fit-Out Requirements
Where a tenant intends to carry out fit-out works that are critical to their operations, an Agreement for Lease will specify when and how those works will be carried out, and whether early access to the premises will be granted.
Conclusion
For landlords, entering into an agreement for lease can make a development viable, not only securing income but also enhancing value for sale or refinancing.
For tenants, it offers certainty that they will secure the right premises on agreed terms, with the benefit of a clearly documented and legally binding process.
However, Agreements for Lease are not without risk. Delays, cost overruns, or a failure to meet conditions can lead to disputes. It is therefore essential that both parties take legal advice to ensure the agreement is robust, clear, and aligned with their commercial objectives.
We’re here to help
Here at Talbots Law, he have a dedicated Residential Real Estate Development team. If you are considering entering into an Agreement for Lease, or are currently negotiating terms, our team are here to help. Complete our form below or call us on 0800 118 1500 to arrange a meeting with a member of our team today.
We will be running a developer roadshow in 2026 for developers, registered providers and professional consultants. Please head over to our event webpage to find out more and register your free place: https://www.eventbrite.co.uk/e/developers-networking-tickets-1977390589483
Disclaimer
The contents of this blog or any other published by Talbots Law cannot be considered as legal advice. You should take no action without prior consultation with a qualified solicitor or legal professional. The contents of this blog refers to the process in England and Wales.
This blog was written by Lucy George, Associate & Solicitor, in our Real Estate Development team.