Agreement For Lease Checklist For New Premises

Emma is opening a pilates studio in Melbourne. The landlord has found her the perfect street-front space, but the building is still being refurbished and Emma needs to sign something now to secure it.

The document she receives is called an agreement for lease. It says the lease will start once the landlord finishes the base building works and Emma gets her fitout approved. That sounds sensible, but the dates are vague and nobody has clearly said what happens if the site isn't ready on time.

If you're committing to premises before construction, refurbishment or fitout is complete, the agreement for lease matters just as much as the lease itself. It should spell out the pathway from signed deal to open doors, not leave you guessing.

What Is An Agreement For Lease?

An agreement for lease is a contract that sets out when and how you and the landlord will enter into the actual lease later.

You'd usually see one when the premises aren't ready for immediate occupation. For example, the landlord may still need to complete building works, obtain approvals, divide a tenancy, install services or hand over a bare shell for your fitout.

The agreement for lease usually sits beside the final commercial lease. The lease explains your long-term occupation rights, rent, outgoings, maintenance obligations and permitted use. The agreement for lease explains what needs to happen before that lease starts.

For your business, the key question is whether you're signing a harmless holding document or a binding commitment. In most cases, it's binding. If you sign it and the conditions are met, you'll usually be required to enter the lease and start paying rent.

A good agreement for lease should cover:

• the exact premises you'll lease, including plans if the space is still being built
• what works the landlord must complete before handover
• what fitout works you're allowed to do
• the conditions that must be satisfied before the lease starts
• the target handover date and longstop date
• what happens if there are delays, defects or approval issues
• who pays for costs, services, approvals, incentives and make good

Don't treat the agreement for lease as a formality. If something goes wrong before opening, this is the document you'll come back to first.

When Should You Sign An Agreement For Lease Before The Premises Are Ready?

You should only sign an agreement for lease before the premises are ready if the major commercial and legal risks have been clearly dealt with.

There are good reasons to sign early. You might need to lock in a rare location, secure landlord works, start council approvals or line up contractors. If you're fitting out a cafe, clinic, gym or retail shop, waiting until the space is fully ready can mean losing the site to someone else.

The risk is that you're committing before you can properly use the premises. If the agreement doesn't protect you, you may be stuck with rent, contractors, staff planning and launch costs while the site still isn't ready.

Before signing, check that you know:

• who your landlord is, including the correct company name, ACN and ABN where relevant
• whether the landlord actually has authority to lease the premises
• whether the proposed use is allowed under planning rules, building rules and the head lease or sublease if there's one
• whether the premises are covered by retail leasing laws in your state or territory
• whether your finance, franchise approval, liquor licence, trade waste approval or council approval needs to be a condition
• when you can access the site for measurements, design work and fitout

If the premises are a retail shop, state and territory retail leasing legislation may apply. For example, retail leasing laws often deal with disclosure statements, outgoings, legal costs, fitout contributions and relocation. The timing and details differ across Australia, so it's worth checking the rules that apply to your state before you sign.

What Should Be In Your Agreement For Lease Checklist?

Your agreement for lease checklist should cover the deal, the works, the approvals, the timing and the exit rights if the project doesn't go to plan.

Here's a practical outline you can use when reviewing a draft. This isn't a finished legal document, and a lawyer should tailor it to your premises and business before you rely on it.

1. Parties: Write the exact legal names of the landlord, tenant and any guarantors, including ACN or ABN details where relevant.
2. Premises: Attach plans, measurements, storage areas, car parks, signage areas and any common areas you can use.
3. Lease Terms: Insert rent, outgoings, term, options, rent reviews, security deposit or bank guarantee, permitted use and special conditions.
4. Landlord Works: Describe exactly what the landlord must build, install, repair or certify before handover.
5. Tenant Fitout: Set out your fitout process, fitout agreement terms, design approvals, contractor requirements, access rights and working hours.
6. Conditions Precedent: List the things that must happen before either side is locked into the final lease.
7. Milestones: Include target dates for plans, approvals, landlord works, handover, fitout access, practical completion and lease commencement.
8. Defects: Explain how defects are recorded, fixed and followed up after handover.
9. Delays: State what happens if the landlord, tenant, builder, council or another party causes delay.
10. Termination Rights: Include a longstop date and the right to walk away if critical conditions aren't met.

Also check how the agreement deals with GST, insurance, damage before handover, assignment, confidentiality and dispute resolution.

The most useful agreements are specific. A clause saying the landlord will provide a suitable tenancy is much weaker than a clause listing the services, walls, flooring, air conditioning, bathrooms, grease trap, exhaust, power capacity and compliance certificates that must be delivered.

How Should Landlord Works And Fitout Approvals Be Handled?

Landlord works and fitout approvals should be written as clear obligations with drawings, specifications, deadlines and approval steps.

This is where many disputes start. The landlord may think they're handing over a basic shell. You may be expecting a premises ready for your builder to start immediately. If the agreement doesn't define the handover condition, both sides can honestly believe different things.

Landlord Works

Landlord works might include base building services, structural works, shopfronts, amenities, fire systems, air conditioning, electrical capacity, plumbing, exhaust systems, accessibility upgrades and compliance certificates.

Your agreement should say:

• what plans and specifications apply
• who pays for each item
• whether works must comply with the Building Code of Australia, planning approvals and relevant Australian Standards
• what counts as practical completion
• who certifies completion, such as a builder, certifier, surveyor or engineer
• whether minor defects can be fixed after handover

Your Fitout

Your fitout clause should give you a workable approval process. The landlord can reasonably require plans, insurance details, contractor licences, safe work procedures and compliance with centre rules. But the landlord shouldn't be able to delay approval indefinitely or reject plans for unclear reasons.

For a commercial fitout agreement for lease, look for deadlines such as:

• you submit concept plans within 10 business days after signing
• the landlord responds within 5 business days
• you submit final plans within 10 business days after concept approval
• fitout access starts once landlord works reach practical completion

Your exact dates will depend on the project. The main point is to replace silence with a process everyone can follow.

What Conditions Precedent Should You Include?

You should include conditions precedent for any matter that must happen before it's fair for you to be locked into the lease.

A condition precedent is a gate. If the condition isn't satisfied, the next step doesn't happen, or one or both parties may have a right to terminate. This is especially useful where you can't fully control the outcome.

Common conditions include:

• Development or building approval: The landlord obtains approvals needed for the premises to be legally occupied.
• Planning approval for your use: Your business use is permitted, such as a medical clinic, gym, food premises or childcare centre.
• Retail lease disclosure: You receive the required disclosure documents under the relevant retail leasing law.
• Finance approval: Your funding is approved on terms you can accept.
• Franchisor approval: If you're a franchisee, the franchisor approves the site and lease terms.
• Fitout approval: The landlord approves your plans, subject to reasonable conditions.
• Licences and permits: You obtain key approvals, such as liquor, trade waste, outdoor dining or health registration where relevant.
• Board or shareholder approval: Your company approvals are obtained under your constitution or Shareholders Agreement.

Each condition should say who is responsible, what they must do, the deadline, whether the deadline can be extended and what happens if the condition isn't met.

For example, if you're opening a cafe in Brisbane and your business depends on outdoor dining approval, you may not want the lease to start unless that approval is granted. Without that condition, you could be paying rent for a site that doesn't support your business model.

Try to avoid vague wording like subject to approvals. Name the approvals and set the process.

What Happens If The Site Is Not Ready On Time?

If the site isn't ready on time, your rights depend on what the agreement for lease says about delays, rent commencement, longstop dates and termination.

This is one of the most important parts of your agreement for lease review. A delay can affect your launch date, staff hiring, marketing, stock, equipment delivery and contractor bookings. The document should say who carries that risk.

Say Mike signs an agreement for lease for a new takeaway shop. The landlord must complete grease trap works and provide 3-phase power by 1 May. Mike's fitout takes 30 days, and the lease says rent starts on the earlier of opening day or 1 June. The agreement also has a longstop date of 30 June.

If the landlord doesn't finish until 15 June, Mike can't complete his fitout by 1 June. A tenant-friendly agreement would push the rent start date back, extend the fitout period and let Mike terminate if the site isn't ready by 30 June. A landlord-friendly agreement might still make rent start on 1 June unless Mike negotiated a delay clause.

If a delay happens, act in this order:

1. Check the agreement for lease, commercial lease and any disclosure statement.
2. Confirm the missed milestone in writing and ask for a revised program.
3. Keep records of emails, site photos, contractor delays, extra costs and approvals.
4. Check whether rent, incentives, fitout periods and longstop dates need to shift.
5. Get advice before terminating, withholding rent or signing a variation.

Also watch for force majeure or extension of time clauses. These may give the landlord extra time for events outside their control, such as severe weather, authority delays or supply issues. The clause should still require notice, evidence and a revised completion date.

Key Takeaways

• An agreement for lease is usually a binding commitment to enter the lease once the agreed steps are satisfied.
• Your agreement for lease checklist should cover the premises, lease terms, landlord works, fitout approvals, conditions precedent, milestones, defects and delay rights.
• Landlord works should be described clearly, with plans, specifications, certification requirements and a clear handover standard.
• Conditions precedent can protect you if approvals, finance, fitout consent or key permits don't come through.
• If the site isn't ready on time, the agreement should explain whether rent is delayed, dates are extended or you can walk away after a longstop date.
• Retail leasing laws, planning rules and building approvals can change the answer, so tailored advice is worth getting before you sign.

If you'd like help with reviewing your agreement for lease, checking your fitout and landlord works clauses, or negotiating delay and approval protections, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.