Commercial Leases

Useful for: Business, Local Government, Government, Non Govt Organisations

In Brief

  • If a lease or licence is of retail premises (or in some cases other business tenancies where goods and/or services are sold from a shopfront), ensure the relevant retail and business tenancies legislation is complied with.
  • Provisions of a lease that must be expressed with certainty include:
    • The area/boundaries of the premises;
    • The rent;
    • The term; and
    • The parties
  • Ensure that you have a thorough understanding of the effect of the following provisions:
    • The permitted use. A tenant is only able to use the premises for the permitted use and for no other purpose. In addition to restricting a current tenant, this can create issues on assignment – for example if the permitted use refers to a certain business, such as “Woolworths Supermarket”, then a proposed assignment to another supermarket brand is not permissible and the Landlord is unlikely to have to agree to an assignment to a different brand.
    • When and how the rent will be reviewed during the term and on the exercise of any renewal.
    • The definition of outgoings (and operating expenses if the premises is in a multi tenancy complex), and who is responsible for payment of what.
    • Rights of renewal and the conditions on which the right can be exercised by the tenant
    • Who bears what responsibility in respect of internal repairs, maintenance, capital replacements and structural repairs.
  • Ensure that any guarantees and/or indemnities in the lease have been drafted by your lawyer (if you are the landlord), or that legal advice is obtained on the effect of them (if you are the tenant).
  • Take note of the conditions on which the tenant can assign/sublet the premises and note that generally speaking, the tenant will not be permitted to bring in a subtenant or assignee who wants to use the premises for something different to the existing permitted use.
  • Where the parties are not ready to enter into a lease for some reason (such as that the premises are under construction or the Landlord must carry out works to make the premises ready for occupation by the tenant), an Agreement for Lease may be desirable (or essential) to protect the interests of both parties. This agreement is a legally binding promise by the landlord that it will grant the lease and the tenant that it will take the lease, subject to all the terms of the Agreement for Lease being satisfied.
  • Take note of whether a lease (or licence) is caught by the specific retail/business tenancies legislation in a State or Territory and ensure it is complied with. This specific legislation prevails over the terms of the lease or licence to the extent that it applies (see related Articles “Retail and Business Tenancies”)

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