The user clause is one of the most commercially significant clauses in any commercial lease. A clause that is too narrow — permitting only one specific use — may make the property difficult to let after the tenant vacates, limit the tenant covenant strength of future assignees, and reduce the rent review headline rent by excluding comparable lettings. A clause that is too wide may give the tenant a flexibility the landlord never intended, attract uses that are incompatible with the building or other tenants, or allow a business rates liability to crystallise that the landlord would prefer to avoid. Getting the user clause right at lease grant — and understanding how it interacts with planning, business rates, rent review, and the landlord's consent rights — is a key part of effective commercial property asset management.
Absolute vs Qualified User Covenants and Section 19(3) LTA 1927
A user covenant in a commercial lease can be drafted in three ways. An absolute covenant: the tenant must use the premises only for the specified use; no change of use is permitted without the landlord's agreement, and the landlord is free to refuse for any reason or no reason at all (there is no implied requirement of reasonableness). A qualified covenant: the tenant must not change the use without first obtaining the landlord's written consent; unlike assignment and subletting (where s.19(1) and s.19(2) LTA 1927 imply a reasonableness requirement), s.19(3) LTA 1927 provides that where a qualified user covenant requires the landlord's consent, the landlord may require payment of a reasonable sum as a condition of that consent, but the reasonableness requirement that applies to assignment and subletting does not apply — meaning the landlord can, in theory, refuse consent to a change of use unreasonably without statutory sanction. A fully qualified covenant (expressly stating consent cannot be unreasonably withheld): this imposes an express reasonableness obligation on the landlord, unlike a bare qualified covenant; however, this is uncommon in commercial leases (unlike residential tenancies). For commercial landlords, the practical effect of s.19(3) is significant: unless the lease expressly qualifies the consent requirement with reasonableness, the landlord has wider rights to refuse a change of use than a change of assignee — though in practice, many landlords will not wish to be seen as unreasonably obstructing the tenant's legitimate business needs.
- Absolute user covenant: landlord can refuse change of use for any reason — no implied reasonableness; rare in modern commercial leases but used for specialist or sensitive sites
- Qualified user covenant: tenant needs consent; s.19(3) LTA 1927 does NOT imply a reasonableness requirement (unlike assignment/subletting); landlord can require a sum of money as a condition of consent
- Fully qualified covenant: some leases expressly add 'not to be unreasonably withheld' — imposes an express reasonableness obligation on the landlord; more protective for the tenant
- No LTA 1988 equivalent: the Landlord and Tenant Act 1988 (which imposes statutory time limits and reasons requirements on landlords dealing with assignment/subletting consent) does NOT apply to user covenants — there is no equivalent duty to respond promptly to consent requests for change of use
- Scotland: the Law Reform (Miscellaneous Provisions)(Scotland) Act 1994 does not apply a reasonableness requirement to Scottish commercial lease user covenants — Scots commercial lease principles apply
How the User Clause Affects Rent Review, Business Rates, and Planning
The width of the user clause has a direct impact on rent review headline rents. A narrow user clause (e.g. 'for use as a Class E office only') restricts the range of tenants who could take the premises and the range of lettings that could be used as rent review comparables. Rent review arbitrators and experts must assess the open market rent on the assumptions set out in the rent review clause — typically the 'willing tenant' assumption disregards any personal factors but applies the hypothetical tenancy terms, including the user clause. A narrow user clause systematically depresses the rent review outcome. A wider user clause (e.g. 'for any use within Class E (Commercial, Business and Service)') includes offices, retail, restaurants, gyms, healthcare uses, and many other uses — this widens the pool of hypothetical tenants and comparables, and typically produces a higher headline rent. Business rates: the rateable value of a commercial property is assessed on the basis of the property's physical characteristics and location; however, the permitted use can indirectly affect the VOA's assessment, particularly where a property has been physically fitted out for a specific use. Planning use class (Town and Country Planning (Use Classes) Order 1987, as amended 2020): from 1 September 2020, many former retail (A1/A2), office (B1a), and other uses merged into the new Class E (Commercial, Business and Service). A lease user clause that was drafted pre-2020 in terms of the old use classes (A1, A2, B1) may now be more restrictive than the landlord intended, as the new Class E is broader. Conversely, a lease drafted as 'Class E' is very wide — the landlord should consider whether to restrict by sub-use within Class E.
- Rent review: a narrow user clause depresses the open market rent by limiting the pool of hypothetical willing tenants; a wider Class E clause maximises rent review comparables
- Class E amalgamation (2020): from 1 September 2020, Use Classes A1, A2, A3, B1 (offices), and others merged into Class E — leases drafted in old use class terms may be narrower than intended; review and update on lease renewal
- Business rates interaction: permitted use affects how the VOA categorises a hereditament; changes to use within the same hereditament may require a Check, Challenge, Appeal submission
- Planning consent: a change of use that falls outside the current planning use class (even if the lease permits it) requires planning permission; lease consent ≠ planning permission; landlord should require evidence of planning consent before accepting change of use
- Landlord's legitimate interest: when drafting or reviewing a user clause, consider the long-term asset management — a clause wide enough to attract a strong field of tenants but narrow enough to prevent incompatible uses in a multi-tenanted building
Keep-Open Covenants and Sole/Anchor Tenancy Provisions
In retail and shopping centre leases, the user clause is often supplemented by a keep-open covenant — an obligation on the tenant to continue trading from the premises during the lease term. The rationale for a keep-open covenant: in a retail scheme, an anchor tenant's continued trading drives footfall for surrounding smaller tenants; if the anchor closes, other tenants suffer and the scheme's rental value falls. However, keep-open covenants are notoriously difficult to enforce. The House of Lords in Co-operative Insurance Society Ltd v Argyll Stores (Holdings) Ltd [1998] held that specific performance of a keep-open covenant will not ordinarily be granted by the courts — a landlord cannot compel a tenant to continue carrying on a business activity. Damages are the remedy, but damages for breach of a keep-open covenant are difficult to quantify (loss of rental income from other tenants whose rents are affected by the anchor's closure; reduction in void costs; loss of turnover rent under turnover rent clauses). Modern retail leases address keep-open covenants by: (i) including a turnover rent clause that gives the landlord a share of the tenant's gross turnover — making the tenant's trading performance directly tied to the landlord's income; (ii) including a surety or rent deposit to secure the keep-open obligation; (iii) allowing the landlord to break the lease if the tenant closes for more than a specified period; (iv) requiring the tenant to maintain the premises as 'fully open and trading' during specified hours. Scotland: keep-open covenants are valid in Scottish commercial leases and have been specifically enforced in some Scottish courts — the position differs from English law (Highland and Universal Properties Ltd v Safeway Properties Ltd [2000]).
- Keep-open covenant: tenant obliged to trade from premises throughout the term; used in retail and shopping centre leases to protect the landlord's rental income and footfall
- Co-operative Insurance v Argyll Stores [1998] HL: specific performance of keep-open not ordinarily available in English law — landlord's remedy is damages, not compulsion
- Damages: difficult to quantify but may include: reduction in turnover rent; increased void risk for surrounding units; lower rent review comparables; loss of management income
- Turnover rent clause: supplements the keep-open obligation; landlord's income partly linked to tenant's gross turnover — creating a mutual incentive for the tenant to trade and the landlord to support the tenant's operations
- Scotland: Highland and Universal Properties v Safeway [2000] (Court of Session) — specific implement of keep-open covenant may be available in Scotland; Scots law position more favourable to landlords than English law
Drafting the User Clause — Landlord Best Practice
From a commercial landlord's perspective, the user clause should be drafted to: (i) maximise rental value by permitting a wide range of uses within a sensible class; (ii) protect the building and other tenants from incompatible uses (e.g. restricting heavy industrial use in an office building, or excluding a competing anchor tenant use in a retail park); (iii) ensure the user clause aligns with the current Town and Country Planning Use Classes (post-2020 Class E) to avoid inadvertent restriction; (iv) link change of use consent to planning consent — require the tenant to provide evidence of planning permission before any change of use takes effect; (v) if the landlord wants to benefit from the wider flexibility without giving up control entirely, include a hybrid clause allowing uses within Class E but requiring consent for specific sub-uses (restaurants within Class E are within the landlord's user clause, but the landlord can restrict cooking smells or trading hours as a condition of consent). On rent review: the rent review clause should specify the assumptions on which the open market rent is assessed — if the user clause is narrow, consider including a 'notional user' assumption for rent review purposes that permits a wider range of uses (this protects the landlord against the rent-depressing effect of the narrow user clause). On lease expiry and LTA 1954: the user clause in the existing lease is a term on which the new LTA 1954 lease is typically based — the tenant may resist a narrower user clause on renewal, and the court can determine the user clause of the new tenancy if the parties cannot agree.
- Draft to current use classes: use the 2020 Class E (Commercial, Business and Service) for flexibility in office/retail/service mixed schemes; avoid old A1/A2/B1 references which may be unnecessarily narrow
- Rent review notional user: where the operational user clause is narrow, include a rent review assumption of a wider notional permitted use — prevents the rent review being artificially depressed by a lease-specific restriction
- Planning alignment: require planning permission evidence before change of use takes effect; lease consent ≠ planning consent; include in the licence for change of use
- Multi-let building protection: use the user clause to prevent uses that could affect other tenants (odours, noise, late trading) by listing excluded sub-uses within the permitted class
- LTA 1954 renewal: on commercial lease renewal, the user clause in the new tenancy can be determined by the court if parties disagree; the starting point is usually the user clause in the existing lease, updated to reflect current use classes
Frequently asked questions
Can a commercial landlord refuse a change of use?+
Yes — under a qualified user covenant, the landlord can refuse consent to a change of use without the same statutory reasonableness requirement that applies to assignment and subletting. Section 19(3) LTA 1927 provides that the landlord can require a reasonable sum as a condition of consent to a change of use, but there is no implied requirement that the landlord must act reasonably in refusing. If the lease expressly adds 'not to be unreasonably withheld', that express qualification applies.
How does the user clause affect the rent review?+
A narrow user clause (permitting only a single specific use) limits the pool of hypothetical willing tenants on a rent review, depresses the headline rent, and reduces the comparables available to the parties. A wider user clause (e.g. Class E) maximises the rent review result. Landlords should consider including a rent review assumption of a wider notional permitted use if the operational user clause is narrow.
What is a keep-open covenant in a commercial lease?+
A keep-open covenant obliges the tenant to continue trading from the premises throughout the lease term. It is common in retail and shopping centre leases where anchor tenants drive footfall. However, English courts will not ordinarily order specific performance of a keep-open covenant (Co-operative Insurance v Argyll Stores [1998] HL) — the landlord's remedy is damages, which can be difficult to quantify.
How does the 2020 Use Class E change affect commercial lease user clauses?+
From 1 September 2020, many former separate use classes (A1 retail, A2 financial services, A3 restaurants — partially, B1 offices) merged into the new Class E (Commercial, Business and Service). Leases drafted before 2020 using old class references (A1, A2, B1) may be narrower than the landlord intended under the new planning framework. On lease renewal, landlords should update user clause references to the 2020 use classes.
Does the Landlord and Tenant Act 1988 apply to user clause consent?+
No — the LTA 1988 (which imposes statutory time limits and reasons requirements on landlords dealing with assignment/subletting consent) does not apply to user clause consent. There is no equivalent statutory duty requiring landlords to respond promptly to consent requests for change of use, or to give written reasons for refusal.