What to Check Before Signing a Commercial Lease in Australia

Signing a commercial lease is one of the biggest “point of no return” moments in a small business journey.

You might be excited because you’ve finally found the right location. Or you might be moving from home or co-working into your first real premises. Either way, the lease you sign can affect your cash flow, your ability to grow (or relocate), and your risk if things don’t go to plan.

That’s why getting the right commercial property advice isn’t just about rent. It’s about understanding the legal terms that control what you can do in the space, what you have to pay, and what happens if the relationship with the landlord goes sideways.

Below, we’ll walk through the key legal steps to take before you sign a lease, what to look out for in the documents, and how to set yourself up for a smoother negotiation (and fewer surprises after you move in).

Note: This article is general information only and isn’t legal advice. Commercial leasing rules and usual market positions can vary depending on your State or Territory and whether the premises are covered by retail leasing legislation.

Why Commercial Property Advice Matters Before You Sign

A commercial lease is usually written to protect the landlord’s position first. That doesn’t mean it’s “unfair” by default, but it does mean you should read it as a risk document, not just a formality.

With solid commercial property advice early, you’re better placed to:

• avoid unexpected costs (like outgoings, make-good, or hidden fees);
• secure the right term and options so you’re not stuck (or forced out too early);
• protect your ability to fit out the premises and operate how you planned;
• understand your exposure if the business doesn’t work out as expected;
• negotiate stronger terms while you still have leverage (before you commit).

And importantly, a lease can create obligations that continue even after you leave. It’s much cheaper to fix a clause before signing than to fight about it later.

Step 1: Confirm The Deal Structure (Lease, Sublease Or Licence?)

Not all “renting a space” arrangements are the same. Before you negotiate the fine print, clarify what you’re actually being offered.

Commercial Lease

A lease typically gives you exclusive possession of the premises for a set term, with rent and other obligations clearly set out. This usually gives you more stability, but also more responsibility.

Sublease

A sublease is where you lease from an existing tenant rather than directly from the landlord. This can be faster and sometimes cheaper, but you may be impacted by the head lease terms (and what happens if the head tenant defaults).

Licence

A licence is often used for shared spaces, pop-ups, kiosks, co-warehousing, or arrangements where you don’t get exclusive possession. Licences can offer flexibility, but they may provide less protection and can be easier to terminate.

If you’re signing something described as “licence” but it looks and feels like a lease, it’s worth checking what rights you truly have. Sometimes the label doesn’t match the practical effect.

If you’re in a shared workspace or a non-traditional setup, a Property Licence Agreement can be a cleaner way to document expectations around access, fees, and termination.

Step 2: Do The Pre-Lease Due Diligence (Not Just The Floorplan)

A location can look perfect in a walkthrough, but your real risks can sit in the details: zoning, approvals, building services, and what the landlord is (and isn’t) responsible for.

Check Permitted Use And Zoning

Your lease will usually include a “permitted use” clause (for example, “retail sale of apparel” or “office premises”). This matters because operating outside that use can put you in breach.

You should also check whether the premises are appropriately zoned for your intended business and whether you need council approvals (especially for food, health, fitness, education, or higher foot-traffic operations).

Confirm You Can Actually Operate The Way You Plan

Ask practical questions early, such as:

• Can you install signage? Where, and what approvals are needed?
• Can you run the required equipment (power load, ventilation, grease trap, extraction)?
• Are there restrictions on operating hours, deliveries, noise, or customer foot traffic?
• Are bathrooms accessible and compliant for your use?
• Is there sufficient parking or access for staff and customers?

Understand The Fitout Reality

Fitouts are where many small businesses get squeezed. You might think you’re just paying rent, but you may also be committing to:

• major upfront build costs;
• landlord approvals and compliance obligations;
• restoring the premises at the end (make-good);
• ongoing maintenance responsibilities.

It’s common for leases to require you to obtain the landlord’s written consent before making alterations. If your business relies on a fitout (like a café, clinic, salon, or showroom), you want those approval steps to be realistic and timely, so the opening date doesn’t slip.

Step 3: Review The Lease Terms That Usually Cost Small Businesses The Most

Most commercial lease disputes aren’t about the obvious parts. They’re about the clauses people skim because they’re eager to get the keys.

Here are the lease terms that usually matter most when you’re getting commercial property advice as a small business or startup.

Rent, Rent Reviews And Increases

Make sure you understand:

• the starting rent and when it’s payable (weekly/monthly in advance);
• the review mechanism (fixed percentage, CPI, market review, or a combination);
• when reviews happen (annually, on option exercise, or both);
• how “market rent” will be determined and what happens if you disagree.

If the lease has a “ratchet clause” (rent can go up but never down), that can be a big issue in soft markets. Whether (and how) these clauses operate can depend on the lease type and the retail leasing laws in your State or Territory, so it’s worth checking the position before you sign.

Outgoings (The Costs That Sit On Top Of Rent)

Outgoings can include council rates, building insurance, cleaning of common areas, security, management fees, and more. Some leases may also try to pass on land tax or other owner costs, but what’s allowed (and what must be disclosed) can vary depending on the State or Territory and whether retail leasing legislation applies.

Key questions to ask:

• Which outgoings are payable by you, and which are payable by the landlord?
• Are outgoings capped or can they increase without limit?
• Do you get an annual statement and supporting evidence?
• Is there any “gross rent” option where outgoings are bundled?

Outgoings can materially change whether the premises are affordable, so treat them as part of rent when you do your budgeting.

Term, Options And The Right To Stay

Many startups sign a short term to “test the waters.” That can be sensible, but you also want to avoid being forced to relocate right when your business is gaining traction.

Look at:

• the initial term (for example, 2 years);
• any option periods (for example, 2 + 2 years);
• how and when you must exercise the option (strict notice windows are common);
• whether the landlord can refuse renewal and on what grounds (this can depend on the lease terms and any applicable retail leasing laws).

If you’re negotiating, it’s often worth focusing on options and flexibility as much as the base rent.

Repairs, Maintenance And Who Pays For What

Commercial leases can push a lot of responsibility onto tenants. Make sure you understand:

• what “maintenance” covers versus “capital repairs” (big-ticket replacements);
• whether you’re responsible for air conditioning, plumbing, electrical, or grease traps;
• what happens if the building needs major works.

A clause that sounds harmless (like “keep the premises in good repair”) can become costly if it effectively makes you pay for replacement of aging systems you didn’t install.

Make-Good At The End Of The Lease

“Make-good” is one of the most expensive surprises for tenants. It’s your end-of-lease obligation to restore the premises, which may require you to:

• remove your fitout;
• repair damage;
• repaint;
• replace flooring;
• return the premises to “base building” condition.

If you’re investing heavily in a fitout, consider negotiating make-good upfront (for example, agreeing on what stays and what goes), and document the condition at the start with photos and a condition report.

Assignment, Subleasing And Exit Flexibility

Many founders assume: “If it doesn’t work, we’ll just find someone to take over the lease.” In practice, assignment and subleasing rights are controlled by the lease, and landlords often retain significant discretion (subject to the lease terms and, in some cases, retail leasing laws).

Check:

• whether you can assign the lease, and what conditions apply;
• whether landlord consent is required (usually yes);
• whether the landlord can refuse consent and on what basis;
• whether you remain liable after assignment (this can happen);
• whether you can sublease part of the space or share occupancy.

If flexibility matters to you, raise this early in negotiations rather than at the point where you need to exit.

Step 4: Get The Right Documents In Place (And Watch For Hidden Personal Risk)

Leases aren’t always just “the lease.” You may be asked to sign additional documents that change your risk profile.

Personal Guarantees

It’s common for landlords to request a personal guarantee from directors or founders, especially for new businesses without a long trading history.

A personal guarantee can mean you’re personally responsible for the tenant’s obligations if the business can’t pay (including rent, outgoings, damages, and sometimes legal costs).

This is a key moment to get commercial property advice, because the whole point of trading through a company is often to manage personal liability. A guarantee can undo that protection.

Security: Bond, Bank Guarantee Or Security Deposit

Understand:

• the type of security required (cash bond vs bank guarantee);
• the amount (often a multiple of monthly rent and outgoings);
• when it can be called on;
• when (and how) it must be returned at the end of the lease.

Incentives And Rent-Free Periods

If the landlord offers incentives (like rent-free weeks or a contribution to fitout), make sure the deal is clearly documented.

Also check whether incentives can be clawed back if you terminate early or default. These clauses can create large repayment obligations.

Side Letters And Verbal Promises

You might hear things like “We’re fine with signage” or “We won’t enforce that clause.” If it’s not written into the lease (or a signed side letter), it can be very difficult to enforce later.

It’s also worth making sure the person you’re negotiating with actually has authority to agree to changes.

Documents That Often Sit Around The Lease

Depending on the premises and the deal, you may also need (or be offered) additional documents such as:

• Heads of Agreement (non-binding in many cases, but can set the commercial terms and timeframe);
• Deed of Assignment if you’re taking over an existing tenancy;
• Sublease Agreement if you’re leasing from another tenant;
• Fitout / works approval documents confirming what you can build and who pays.

If you’re not sure what documents should exist for your deal, a Commercial Lease Review can help you spot the gaps early, not after disputes start.

Step 5: Align The Lease With Your Wider Business Legal Setup

A lease is a major commitment, but it’s not the only legal foundation you need. Before signing, it’s worth checking that the rest of your business setup supports what you’re taking on.

Choose The Right Business Structure For The Lease

Who should be the tenant?

In many cases, startups sign the lease in the name of their company. That can help separate business risk from personal risk (although personal guarantees may still apply).

If you’re a growing startup, it’s also worth making sure your internal governance documents match your real-world obligations. For example, if you’re setting up a company and bringing in co-founders or investors, a Company Constitution can form part of the framework for how the company makes big decisions (like committing to a multi-year lease).

Consider How You’ll Handle Customers On Site

If you’re operating from physical premises, think about customer-facing risk points: cancellations, refunds, service limitations, and safety warnings.

Strong, tailored terms can help set expectations and reduce disputes, especially if you provide services on-site (like training, health, beauty, or repairs). This is where Customer Contract terms can be a practical part of your overall risk management.

Make Sure Your Consumer Law Position Is Clear

Even though your lease is “commercial,” your dealings with customers are still regulated.

The Australian Consumer Law (ACL) affects how you advertise, what you promise, and how you handle returns and remedies. If your premises will be retail-facing, keep your sales processes and signage aligned with your obligations under the ACL, including rules around misleading or deceptive conduct and consumer guarantees.

If You’re Hiring Staff For The New Location

Moving into premises often means hiring. Make sure you have the right employment paperwork and policies in place before opening day, not after the first roster issue or dispute.

In many cases, you’ll want a properly drafted Employment Contract that matches your award coverage, hours, and role expectations.

If You’re Collecting Customer Data (Even Offline)

Many physical businesses still collect personal information (email lists, memberships, bookings, CCTV footage, Wi-Fi sign-ins). If you’re collecting and storing personal information, you may need a Privacy Policy and processes for handling access requests, complaints, and data security.

Privacy compliance is easier to build from the beginning than to retrofit after you’ve already collected a database of customer details.

Key Takeaways

• Good commercial property advice starts before you negotiate rent, because the lease terms control your operational freedom, costs, and exit options.
• Confirm the structure of the arrangement (lease, sublease, or licence) so you know what rights you’re actually getting and what protections apply.
• Do practical due diligence early: permitted use, zoning, fitout approvals, building services, and any constraints on how you’ll run the business.
• Pay close attention to clauses that commonly cause unexpected costs, including outgoings, rent reviews, repairs, make-good, and restrictions on assignment or subleasing.
• Watch for personal risk documents like guarantees and security arrangements, which can expose founders even when a company is the tenant.
• Align the lease with your broader legal setup, including customer terms, consumer law compliance, employment contracts, and privacy obligations.

If you’d like a consultation on your commercial lease or broader commercial property advice before you sign, you can reach us at 1800 730 617 or team@sprintlaw.com.au for a free, no-obligations chat.