A commercial lease is more than a document that gives you the right to occupy a space. It is a strategic tool that shapes the financial and operational relationship between landlord and tenant. Get it right, and it can support a stable and productive business relationship. Get it wrong, and you may face costly disputes, unexpected liabilities, and limited options to exit or adapt.
Whether you’re a landlord, tenant, legal adviser, or property manager, it’s essential to understand the leasing provisions that can cause the most friction. This article explores some of the key areas where early attention can make all the difference.
The Real Price of the Lease: Rent, Outgoings, and Make-Good
For many parties, the first thing they look for in a lease is the rent figure. It seems straightforward: a base amount and a formula for increases. Yet the details of how rent is reviewed over time can be one of the most contested parts of a lease.
Market rent reviews, in particular, are fertile ground for disagreement. If the lease does not set out how the new rent will be calculated, how valuations will be obtained, and what happens if the parties cannot agree, the process can stall or spiral into a dispute. Timing is critical. Missing a notice deadline, even by days, can remove a tenant’s right to challenge a review.
Outgoings are another hidden cost that can change the economics of a lease. They must be clearly defined. Is the tenant contributing to capital works? How are shared services like security or cleaning apportioned? In Queensland and some other states, retail leasing laws require landlords to disclose recoverable outgoings in detail. If they fail to do so, they may not be able to recover them at all. While that offers some protection, it should not replace thorough due diligence.
Finally, there is the make-good obligation. This kicks in at the end of the lease and can range from minor repairs to a complete strip-out. The wording matters. Terms like “to the landlord’s satisfaction” leave room for interpretation and can lead to costly disputes. The safest course is to agree on what “make-good” means for your premises at the outset, ideally with photos or plans.
Together, rent, outgoings, and make-good determine the true cost of the lease. Understanding them up front sets the stage for realistic budgeting and fewer surprises later.
Certainty from Commencement to Clean-Up: Term, Options, and Exit Rights
Once the numbers are clear, the next challenge is certainty over timing. A lease’s start and end dates seem basic, but in practice they can be linked to trigger events such as the completion of landlord works or the registration of the lease. Without clarity, this can create uncertainty over when rent begins, when possession is granted, and who bears the risk if delays occur. Tenants should confirm whether early access for fit-out will trigger rent or start the make-good clock. Landlords should avoid inadvertently starting the lease by giving access without agreed conditions.
As the lease term nears its end, options to renew become relevant. These rights are contractual, not automatic, and they must be exercised exactly as stated. A missed deadline, even by one day, can mean the opportunity is lost. Courts have taken a strict approach to enforcing these requirements.
If no renewal is exercised and the tenant stays with the landlord’s consent, this is usually called “holding over.” It creates a short-term arrangement, often a monthly tenancy, which either party can end on short notice. While convenient, it brings risks: higher rent, reduced security, and vulnerability to redevelopment plans. Holding over should be a temporary bridge, not a long-term arrangement.
By addressing term, renewal, and exit rights early, both parties can avoid misunderstandings and protect their operational timelines.
Who Does What, and Who Pays: Fit-Out and Works Obligations
Commercial premises rarely come ready-made for a specific business. Fit-out clauses determine who will carry out the works, when they will be done, and who will pay for them.
A well-drafted lease will set out whether the landlord or tenant is responsible for the initial fit-out, and what those works include. Landlord works might involve base-building upgrades or compliance improvements. Tenant works often involve branding, layout changes, and customer-facing features.
Key points to resolve early include responsibility for approvals, liability for delays, and the conditions of access. Many leases require tenants to submit detailed plans and to use designers who meet landlord requirements. Regardless of who designs the fit-out, tenants remain responsible for compliance with relevant laws, from fire safety to accessibility.
Ownership of the fit-out is a common misconception. Paying for it does not necessarily mean you own it when the lease ends. The lease should specify ownership and whether removal is required. If removal is required, the tenant is usually responsible for repairing any resulting damage.
Clarity in this area prevents disputes during the lease and costly surprises at the end.
Dividing the Duties: Repair and Maintenance Responsibilities
Even in a brand-new space, repair and maintenance obligations matter. Over time, things break, wear out, or need upgrading. Leases often split these duties, with landlords handling structural repairs and tenants covering non-structural maintenance. Problems arise when terms like “air-conditioning” or “mechanical services” are not defined. Is replacing a unit a landlord’s responsibility, or is it the tenant’s? Without precision, expensive disputes can follow.
Tenants should be cautious about accepting responsibility for capital items unless that is part of the negotiation. Landlords generally retain responsibility for compliance with building-wide obligations, such as fire safety or accessibility. Tenants, in turn, handle compliance linked to their specific operations, like health and safety or signage.
Getting the allocation right from the start reduces operational friction and unexpected costs.
The Foundations of Tenancy: Permitted Use and Planning Compliance
Every lease includes a permitted use clause, which defines what the tenant can do in the premises. Landlords often prefer narrow definitions to protect the mix of tenants and their own approvals. Tenants usually want broader definitions for flexibility.
However, the lease is only part of the story. Local planning laws must also allow the intended use. A lease might permit a café, but if the property is not zoned for food service, the tenant could be paying rent for space they cannot legally operate. Tenants should verify zoning and approvals before signing. Landlords should avoid giving informal assurances that are not supported by the lease.
Matching the lease terms with planning compliance ensures that the premises can actually be used as intended.
Exit Strategies in Disguise: Assignment and Subletting:
Sometimes a tenant needs to leave before the lease ends. The main tools are assignment and subletting. Assignment transfers the lease to another party. Subletting creates a new agreement between the tenant and a subtenant while keeping the original lease intact.
Both usually require landlord consent. The lease should set out when consent can be withheld, what conditions may be imposed, and whether changes in company control count as an assignment. It should also address whether the outgoing tenant and guarantor are released from liability.
In Queensland, the Property Law Act reforms that commenced on 1 August 2025 have changed the way lease transfers are handled. Under the new regime, outgoing tenants and guarantors are automatically released from liability after a second assignment. The Act also clarifies that lease covenants continue to bind the assignee unless the lease expressly provides otherwise.
These changes make it even more important for both landlords and tenants to understand the long-term implications of assignment provisions. By knowing the rules before a transfer becomes necessary, parties can better manage their risks, avoid unnecessary disputes, and ensure that financial exposures are clearly defined from the outset.
Negotiating or Reviewing a Lease?
A well-drafted lease is more than a contract. It is the framework for a stable commercial relationship, and paying close attention to these core issues will help protect your position and create a stronger, more predictable business arrangement.
Whether you’re about to sign, renegotiate, or troubleshoot a current lease, our team can help you identify risks, close gaps, and secure terms that work for you.
