Navigate with confidence - Visual Legal

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Entering into a commercial lease is a major decision for any business — it's often a long-term commitment that carries significant financial and operational implications. 

At Visual Legal, we see clients navigate these agreements regularly, and the key takeaway is simple: get the terms right from the start, because you'll likely be living with them for years.

This guide outlines what a commercial lease involves, common terms to watch for, and practical points to consider. It's not exhaustive — every lease is unique — so always consult a specialist commercial leasing solicitor before committing.

What Is a Commercial Lease?

A commercial lease is an agreement allowing a tenant to occupy premises for business purposes — such as offices, warehouses, industrial spaces, medical clinics, or professional suites. Unlike residential leases, commercial leases are largely unregulated by specific consumer-style legislation (except where they qualify as retail leases).

Commercial vs Retail Leases

In Australia, a key distinction exists between commercial and retail leases. Retail leases (governed by state-specific legislation like the Retail and Commercial Leases Act 1995 (SA) or equivalent acts in other states) apply when the premises are used for selling goods or services directly to the public (e.g., shops, cafes, restaurants in retail centres). 

Retail leases provide tenants with stronger statutory protections, including mandatory disclosure statements, minimum terms in some cases, rent review restrictions, and compensation rights for relocation or demolition.

Standard commercial leases (non-retail) offer greater flexibility for negotiation but fewer automatic protections — terms are more freely set by the parties.

How Commercial Leases Are Negotiated

Commercial leases are typically negotiated directly between landlord and tenant, often with agents or tenant representatives involved to advise on market rent, outgoings, and other terms. 

A heads of agreement or letter of offer usually precedes the formal lease, setting out key commercial points.

Common Key Terms in Commercial Leases

Most leases include these core elements — negotiate them carefully:

Term and Options to Renew

Lease lengths vary based on negotiation — commonly 3–5 years for smaller spaces, up to 10–15 years (or more) for larger or anchor tenants. Many include tenant options to renew for further periods (e.g., another 3–5 years). 

An option gives you the right (but not obligation) to extend — if validly exercised (usually by written notice within a specified window, often 6–12 months before expiry), the landlord must grant the renewal on agreed terms (often market rent or CPI-adjusted). Missing the notice deadline can forfeit the option.

Rent

Base rent (fixed or market-based) payable periodically (monthly/quarterly). Rent reviews (annual or at renewal) are common — methods include fixed percentage, CPI, market review, or a combination. Watch for "ratchet clauses" preventing rent decreases.

Outgoings

Tenants often pay a share of landlord costs (net lease) — council rates, water, land tax, strata levies, building insurance, maintenance. Clarify what's included/excluded and your proportion (e.g., based on lettable area).

Security / Bond

Security protects the landlord if you default. Common forms: cash bond (security deposit) or unconditional bank guarantee (preferred by many landlords — it's a bank promise to pay up to a limit). Amounts are negotiated — typically 3–6 months' rent + GST, higher for new or higher-risk tenants, lower for established ones. Personal guarantees from directors are also frequent.

Make Good Obligations

At lease end, you usually must return the premises in good repair and condition (subject to fair wear and tear). This often requires removing your fit-outs, fixtures, and signage; repairing damage; repainting; and restoring to a "base building" or original state. Vague wording can lead to disputes — specify exactly what's required to avoid surprise costs. Some leases cap make good or allow cash in lieu.

Fit-Out and Alterations

Many premises are delivered as a "shell" — the lease sets out what works you can do, timelines, approvals needed (landlord, council, building certifier), who pays, and reinstatement requirements. Include clauses on landlord consent (not unreasonably withheld) and who owns improvements.

Other Common Obligations

Permitted use (ensure it matches your business); insurance (tenant often covers contents/public liability); maintenance/repairs; assignment/sub-letting (landlord consent clauses); and default remedies.

What Happens When the Lease Ends?

If no renewal/option is exercised, the lease expires. You may "hold over" month-to-month (often on existing terms, terminable with notice) until vacating. Make good must usually be completed before handover — failure can lead to withheld bond/guarantee or claims for costs. Vacate fully, return keys, and remove belongings to avoid ongoing rent liability.

The Role of a Commercial Leasing Lawyer

Landlord's lawyer typically drafts the lease. Tenant's lawyer reviews it, advises on risks/obligations, negotiates changes, and ensures commercial terms are properly documented. Both sides may negotiate finer legal points.

Costs

Legal fees vary by lease complexity, negotiation extent, rent level, and lawyer seniority — often fixed-fee quotes available. Each party usually pays their own costs, but tenants sometimes agree to reimburse landlord's reasonable fees (negotiable term).

Why Get Advice Early?

Commercial leases bind you for years — small oversights (e.g., unclear make good, restrictive use, harsh rent reviews) can cost thousands later. Thorough due diligence on premises and terms is essential.

At Visual Legal, we provide practical, no-nonsense advice on commercial leases — whether you're a tenant reviewing a proposed agreement or a landlord preparing one. 

We'll meet confidentially (in our central Adelaide office or via secure teleconference), assess your situation, explain key risks and opportunities plainly, and help negotiate terms that protect your business. 

Book your free consultation — no pressure, just clear guidance to get it right from day one.

Thinking about a new lease or reviewing an existing one? Let's talk today.