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Businesses often require a physical space of their own to operate. After all, not all business operations can be run from home. It’s also wise to check whether your current setup is ideally structured for a physical lease – our article on business structure considerations can help you decide.
If you’re a business owner and find yourself needing a dedicated place to conduct your activities, then you may need to enter into a Commercial Lease Agreement.
A Commercial Lease Agreement will set out the terms for how business is conducted on the premises – covering everything from rent levels and payment methods to repairs and maintenance responsibilities. It’s essential to understand every detail of the arrangement before you commit to a lease, especially as market trends evolve in 2025.
In this article, we’ll discuss key aspects of commercial lease agreements that you need to be aware of – keep reading to learn more.
As we head deeper into 2025, the commercial leasing landscape is embracing more flexibility and digital management. Many landlords are now offering negotiable lease terms and even shorter-duration contracts to accommodate dynamic business models. This shift highlights the importance of regularly reviewing your lease terms, as our Contract Redrafting service can ensure your agreement remains current and suited to your operational needs.
What Is A Commercial Lease Agreement?
A commercial lease agreement is a rental contract for a property that is used with the intention of generating a profit. This can include spaces for businesses, warehouses, factories, and service providers.
Unlike standard residential rental contracts, commercial lease agreements are highly customisable. For example, while a typical rental agreement might guarantee full-time use of a property, commercial leases can impose specific limitations on the hours of operation or restrict usage to particular areas of the premises.
| Example Isla is renting a property for her dentistry clinic. The terms of her commercial lease agreement allow her business to operate between 8am and 6pm, and she is allocated a portion of the building’s parking spaces. Additionally, the agreement expressly permits only dental services on the premises, demonstrating how commercial lease agreements can be tailored to be either more or less restrictive. |
How Is A Commercial Lease Agreement Different To A Retail Lease?
It should be noted that while both retail and commercial leases are designed for profit-making activities, they are not necessarily the same thing – although the differences may sometimes seem subtle.
A retail lease typically accommodates the buying and selling aspect of a business and is subject to specific regulations. In NSW, for instance, retail leases are governed by the Retail Leases Act 1994 (NSW), which sets out additional protections for tenants in the retail sector.
Do I Need A Commercial Lease Agreement?
Yes, if your business plans on operating from physical premises, a commercial lease agreement is indispensable. Having your lease in writing not only secures your right to use the property but also clearly delineates the obligations of both landlord and tenant.
If you don’t secure a commercial lease agreement, you risk leaving your business unprotected. Such an agreement ensures that you have the legal right to occupy and use the premises for an agreed period.
Without a formal, written contract, any verbal agreements are difficult to enforce. Should a landlord decide to terminate your tenancy without notice, you may find yourself without recourse since your rights have not been contractually confirmed.
To avoid unwelcome surprises, it’s crucial to have a commercial lease agreement in place. If a prospective landlord refuses to provide one, it might be best to explore alternative locations.
What Does A Commercial Lease Agreement Cover?
A commercial lease agreement typically covers the essentials of any rental contract, including:
- Rent amount
- Payment schedule and methods
- Details of any scheduled rent increases
- Maintenance and repair obligations
- Outgoings such as insurance and rates
- What actions constitute a breach by the tenant and the remedial period
- Indemnities and guarantees
- Handling of damage and destruction of property
- Subleasing rights and conditions
- Termination clauses and renewal options
Both the landlord and tenant have room to negotiate additional terms before signing, ensuring that the lease is fair and attractive for both parties.
It’s worth engaging a lawyer to review your commercial lease agreement before finalising any deals. A thorough review can identify potential pitfalls and ensure your interests are safeguarded – a practice that has become even more important in 2025’s fast-evolving market.
What Does Permitted Use Mean?
Permitted use refers to the activities that the lease agreement explicitly allows you to carry out on the premises.
This scope is usually outlined by the landlord and documented in the lease, ensuring there is no ambiguity about how the property may be used.
| Example Diana intends to open her own garment factory in a promising industrial space. However, upon reviewing the lease agreement, she discovers that the landlord restricts the use of heavy and noisy machinery on the premises. Diana must either negotiate an amendment to the lease or look for an alternative location where her business activities are permitted. |
If a tenant operates a business activity outside the scope defined as ‘permitted use’, the landlord may have grounds to terminate the lease altogether.
In some cases, tenants can seek permission from both the landlord and the local council to carry out activities that fall outside the standard permitted use.
What If I Want To Sublease My Business Premises?
Subleasing your business premises generally requires the landlord’s prior approval. The lease agreement will typically state whether subleasing is permitted and any conditions that must be met.
If your agreement does not explicitly cover subleasing, you can still request approval from your landlord – just be sure to get any consent in writing.
Alternatively, you might consider having an expert lawyer review your sublease agreement. At Sprintlaw, our Sublease Review Package ensures that your subleasing arrangements comply with the terms of your overall lease.
Can I Renew Or Extend My Commercial Lease Agreement?
As your lease approaches its end, many businesses prefer to extend the lease if the location and conditions are working well for them. Renewing your lease can provide continuity and stability in a volatile market.
If you wish to extend the agreement, it’s important to formalise the renewal through a new contract or an addendum to your existing agreement. This allows for renegotiation of certain terms to better reflect current market conditions in 2025.
Obtaining professional legal advice is essential during this process. Our team can help you carefully review and amend your lease terms to ensure they continue to meet your business needs – talk to us about our Extension of Lease service today.
Can I Get A Lawyer To Review My Commercial Lease Agreement?
Yes, it’s always advisable to have a legal professional review any lease agreement before you sign it. Commercial lease agreements are particularly intricate, as they often contain clauses that aren’t present in standard residential contracts.
At Sprintlaw, we offer a Commercial Lease Agreement Review package to ensure the terms of your agreement work in your favour and minimise your risk of future liability. With the ever-changing commercial landscape in 2025, expert review has never been more critical.
A robust review typically involves checking that:
- The premises can be used for the intended purpose
- You’re comfortable with the outgoings and associated costs
- The landlord is required to act reasonably when granting approvals or consents
- Appropriate notice is provided for termination due to repair issues or damage
- Indemnities are fairly drafted, especially in relation to landlord negligence
- Costs are clearly outlined and match what was agreed upon
- Any power of attorney clauses are not overly burdensome, preventing the landlord from being appointed as your attorney
Our specialist lawyers are well-versed in these details – get in touch if you’d like some expert guidance!
Key Takeaways
The commercial lease agreement you enter into will be central to the smooth operation of your business, so it’s important to secure terms that work for you. Seeking professional legal advice is wise to ensure you’re in the strongest possible position.
To summarise what we’ve discussed:
- Commercial lease agreements pertain to premises used for business activities (while buying and selling is generally covered by a retail lease).
- Having a written commercial lease agreement is a crucial step in protecting your business interests.
- It’s essential to engage a lawyer to draft or review your lease agreement – think about our Contract Redrafting service for thorough scrutiny.
- If you intend to sublease, you must secure your landlord’s consent in writing.
- Commercial leases can often be renewed or extended, but professional review of any extensions is equally important.
Looking ahead, the commercial leasing market in 2025 continues to evolve with increased digitalisation and flexibility. Leasing arrangements are now more tailored to the modern business environment, so staying informed through trusted sources – like our legal tips – is key to making sound decisions.
If you would like a consultation on commercial lease agreements, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.
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