Signing a commercial lease in Australia without a proper checklist is a bit like buying a car without looking under the bonnet. You might get lucky, but the odds are stacked against you. A single overlooked clause on permitted use or a missed compliance deadline can cost tens of thousands of dollars. In July 2024, a NSW owners corporation was fined $225,000 for breaching Work Health and Safety obligations, a stark reminder that property duties can’t be contracted out. Whether you’re leasing a shopfront, warehouse, or office, the questions you ask before you sign determine whether the deal works for you or against you.
Disclosure: Some links on this page are affiliate links. If you make a purchase through them, Britwealth may earn a commission at no extra cost to you. We only include products and services that are relevant to the topic.
This article is general information only and does not constitute professional advice. For your specific situation, consult a qualified professional.
Commercial property isn’t residential. The rules are different, the costs are higher, and the protections are fewer. A retail lease might fall under specific state legislation that gives you disclosure rights, while a warehouse lease might not. Understanding which category your lease falls into is the first real step. Here’s what you actually need to know.
Four Things to Know Before You Sign a Commercial Lease
One term you’ll hear constantly is permitted use. This is the clause that defines exactly what business activities you’re allowed to carry out in the space.
What I tend to notice is that tenants focus on the rent figure and skim the permitted use clause. That’s the mistake that comes back to bite them when they want to add a seating area or start selling online pickup from the same location.
The Real Cost of a Commercial Lease: What Adds Up
The headline rent is what gets your attention, but the total occupancy cost is what hits your bank account. Outgoings are the biggest hidden factor. These can include council rates, water charges, building insurance, common area maintenance, security, cleaning, and management fees. In a shopping centre or business complex, those costs are typically passed directly to the tenant.
You need to ask for a detailed estimate of outgoings before you sign. Some leases cap annual increases on outgoings; others don’t. If there’s no cap, your costs can jump sharply if the landlord’s insurance premiums rise or the building needs major repairs.
Then there’s the fit-out. Fitting out a commercial space — electrical, plumbing, shelving, signage, flooring — can run into six figures depending on the trade. Some landlords offer a rent-free period to offset this, but the lease still needs to specify who owns the fit-out at the end and what you’re required to remove.
Stamp duty on commercial leases also exists in some states, though it’s being phased out in others. Your solicitor should confirm whether it applies in your jurisdiction. And don’t forget GST — commercial rents are generally GST-inclusive, which affects your cash flow if you’re not registered.
For a deeper look at how different cities stack up on costs, check our comparison of commercial space costs in Sydney versus Melbourne.
Common Mistakes Tenants Make With Commercial Leases
Signing before checking zoning and approvals
Zoning determines what you can legally do on the premises. A space zoned for light industrial won’t allow a restaurant. A retail shop in a heritage building might have restrictions on signage or hours. Check with your local council before you sign anything. If the permitted use clause doesn’t match the zoning, you’re in a bind from day one.
Ignoring the make-good clause
The make-good clause says what condition you must return the premises to at the end of the lease. A “full make-good” means stripping everything back to the bare structure — removing all partitions, wiring, plumbing, and flooring you installed. That can cost as much as the original fit-out. Negotiate for a “partial make-good” or a “as-is” return if the landlord plans to re-lease the space to a similar tenant.
Not understanding rent review mechanics
Rent reviews can be fixed (e.g. 3% per year), CPI-linked, or market-based. Market reviews are the riskiest because they can spike if comparable rents in the area have risen. If your lease has a market review, ask for a cap (e.g. no more than 5% increase per review) or a floor (no decrease) to limit the downside.
Overlooking the personal guarantee
Landlords routinely ask directors of small companies to personally guarantee the lease. That means if the business can’t pay, the landlord can come after your personal assets — your home, your savings, your car. If you’re asked for a personal guarantee, try to limit it to a fixed amount (e.g. six months’ rent) or a shorter period (e.g. the first two years only).
If you’re unsure about any clause, getting a second opinion from a legal professional can save you from a costly mistake. Services like JustAnswer Legal can connect you with a lawyer who specialises in commercial leases for a flat fee, which is often cheaper than a full solicitor consultation.
How to Review a Commercial Lease: A Practical Walkthrough
Start with the premises and permitted use
Walk the space with the lease in hand. Measure the floor area yourself — don’t rely on the agent’s brochure. Check that the permitted use clause covers everything you do now and might do in the future. If you run a café that wants to sell packaged coffee beans online, make sure the clause covers retail sales, not just food and beverage on-site.
Scrutinise the outgoings and rent review clauses
Ask the landlord or agent for a breakdown of outgoings for the previous financial year. Compare it to the estimate in the lease. If the numbers don’t match, ask why. For rent reviews, confirm the method (fixed, CPI, or market) and the frequency. A 5-year lease with annual market reviews is far riskier than one with fixed 3% increases.
Check the term, options, and break clauses
The initial term is your firm commitment. Option periods give you the right to renew, but you usually need to give written notice 3–6 months before the end of the initial term. Miss that window and the option lapses. A break clause lets you exit early, often with a penalty (e.g. 3–6 months’ rent). If your business is uncertain, a break clause is worth negotiating for.
Review repairs, maintenance, and insurance
Commercial leases typically make the tenant responsible for internal repairs and the landlord responsible for structural ones. But “internal repairs” can be interpreted broadly. Clarify who pays for HVAC maintenance, plumbing, and electrical systems. Insurance requirements should be spelled out — public liability, property damage, and sometimes business interruption. Make sure the levels are realistic for your budget.
Plan for the future: assignment, subleasing, and exit
If you sell your business or want to move, you may need to assign the lease to someone else. Landlords can refuse consent unreasonably, but the lease should say so. Subleasing is even more restricted. If you think you might sublease part of the space, get that right in the original lease. And always plan for the exit — know what the make-good obligation is and how much it will cost.
For a broader view of how remote work is reshaping commercial leases, read our article on the impact of remote work on Australian commercial rental markets.
Frequently Asked Questions About Commercial Leases in Australia
Can I move into a commercial property before the lease is signed? ▾
What’s the difference between a retail and a commercial lease? ▾
How much notice do I need to give to renew an option? ▾
Who pays for building insurance in a commercial lease? ▾
Can the landlord increase the rent during a fixed term? ▾
What happens if my business fails and I can’t pay the rent? ▾
Your Lease Is a Long-Term Partnership — Treat It Like One
The commercial lease you sign today will shape your business’s finances, flexibility, and future options for years. A well-negotiated lease gives you room to grow, predictable costs, and a clear exit path. A rushed one locks you into terms that can drain your cash flow and limit your ability to adapt. The questions in this checklist aren’t just paperwork — they’re the difference between a space that works for you and one that works against you.
Remember: this article is general information only. For advice on your specific situation, speak to a qualified professional.
If this was useful, you might also want to read How to Choose the Right Commercial Lease in Australia.
Sources and Further Reading
Commercial Rent Negotiation Secrets Every AU Entrepreneur Needs to Know — Practical negotiation tactics for Australian commercial tenants.
Understanding Security Deposits When Renting Commercial Space in Australia — What happens to your bond and how to protect it.
PMVA (2026). Commercial Property Inspection Checklist. 🔗
Sprintlaw (2025). Commercial Lease Checklist: What to Review Before You Sign. 🔗
CPN (2025). So, You Want to Buy Commercial Property? Start With This Checklist. 🔗
