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Property that is used for industry with the intention of making a profit is considered commercial property. If you’ve been renting commercial property or renting one out to another party, it’s common practice to have a Lease Agreement in place to set out the details of your arrangement.
However, there may be situations where you don’t have a Commercial Lease Agreement. In this case, what exactly are your rights?
What Is A Commercial Lease Agreement?
A Commercial Lease Agreement is a formal, legally binding contract between a landlord and a business (in this case, the tenant). A Commercial Lease gives you full use of the property for an agreed period, and it sets out the rights and obligations of both parties throughout this relationship.
For example, depending on your arrangement, a comprehensive Commercial Lease Agreement would typically cover:
- Duration of the lease
- Exclusive right to use the property
- Subletting rights
- Fees and payment schedules
- Repairs and maintenance responsibilities
- Terms for terminating the lease
- Fit-out works and alterations
- Dispute resolution mechanisms
Commercial Lease Vs Residential Lease
Whilst both commercial and residential leases are generally governed by statute, common law and implied terms, the key difference lies in the use of the premises – simply put, whether you’re operating a business or residing there. As market conditions in 2025 evolve, it is particularly important for businesses to ensure their lease agreements are tailored to their specific operational needs.
Every commercial relationship is unique, whether the premises will be used to run a bar, a hair salon or an innovative start‐up. You’ll want a strong Commercial Lease that covers every aspect of your arrangement. For example, if you’re concerned about the flexibility to sublet, make sure your agreement clearly sets out how and if you can sublease to other parties.
Why Do I Need One?
A Commercial Lease Agreement is not as rigidly prescribed by law as some other business contracts. This means that you and your landlord have considerable freedom to negotiate terms such as rent rates and lease duration. However, certain statutory protections – for example, provisions under the Retail Leases Act in your state – may still apply in specific circumstances.
It’s imperative to have an expert survey the property and negotiate terms that protect your business interests. For further guidance on your rights and legal compliance as a tenant, you may wish to read our Legal Requirements for Starting a Business article, which is updated to reflect 2025 standards.
While we can’t negotiate directly on your behalf, our lawyers are happy to review your Commercial Lease Agreement and propose amendments that you can then negotiate with your landlord.
What Happens If I Don’t Have A Commercial Lease?
Like any other business transaction, the absence of a written contract can leave you without certain rights. For instance, if unforeseen issues like significant flooding occur and damage your leased premises, you would normally rely on clauses in your Commercial Lease to determine responsibilities such as repair costs.
Using the flooding example, a well-drafted agreement would typically require the landlord to reimburse repair costs for structural issues. Without a Commercial Lease, there’s no clear procedure for settling such disputes, often leading to prolonged negotiations and uncertainty.
Similarly, consider the scenario where you might want to terminate your lease early. Without a formal agreement outlining the procedure, negotiating an early exit becomes a challenging and potentially costly process.
If your arrangement is only verbal, claiming your rights as a tenant can be even more difficult, as enforcing verbal agreements in court is notoriously challenging. For more insight on safeguarding your legal rights, check out our Contract Review Service.
As noted, Commercial Leases provide most of your rights and entitlements in writing. The Real Property Act 1900 (NSW) stipulates that leases must be executed in an approved form, which underscores the importance of having a formal agreement in place.
What Should I Look out For When Creating A Commercial Lease Agreement?
As mentioned previously, nearly every term in a lease is negotiable. This allows you to craft an agreement that specifically benefits your business, ensuring that your operational needs are fully addressed.
When negotiating a lease agreement, it’s important to keep the following in mind:
Resolving Disputes
Your lease should clearly outline a process for dispute resolution. In cases where disagreements between tenant and landlord arise, a common and cost-effective option is to refer the matter to the NSW Civil and Administrative Tribunal (NCAT) for mediation before considering court action. This written framework can significantly streamline the resolution process.
For further clarity on dispute resolution and alternative methods of contractual redress, you might also find our Contract Review Service useful.
Ending The Lease
Commercial Lease agreements explicitly state the lease end date, and these are generally longer than residential leases. While a residential lease may span one year, a Commercial Lease typically runs for 3 to 5 years with options for renewal – an arrangement that accommodates the long-term planning needs of businesses in today’s dynamic market.
Most termination clauses allow either party to end the lease with a specified notice period. However, such clauses are often drafted in favour of the landlord. It’s essential to negotiate a termination clause that offers you sufficient flexibility in the event of changing business conditions or unforeseen circumstances.
Repairs And Maintenance
A robust lease should clearly assign responsibility for repairs and maintenance. Generally, landlords are accountable for structural repairs – such as those related to roofing, plumbing, or the building’s overall integrity – while tenants handle routine upkeep like cleaning and minor fixes. Ensuring this distinction is clearly documented helps prevent disputes down the track.
It’s recommended to have the property professionally surveyed and to negotiate terms that unambiguously delineate each party’s responsibilities. For additional advice on protecting your business interests, you might refer to our Legal Requirements for Starting a Business guide.
Costs
Rent is a major aspect of any lease agreement. For commercial properties, additional considerations include rent abatement and periodic rent reviews. In the current 2025 market, it’s common for rent reviews to be scheduled every 3 to 5 years, allowing adjustments in line with market trends.
Other costs can include bond payments, insurance premiums, legal fees, fit-out expenses and refurbishment costs. A clear and comprehensive breakdown of these expenses within your agreement is vital to prevent unexpected financial burdens later.
Additionally, many Commercial Lease Agreements include clauses regarding outgoings – extra costs such as cleaning fees, maintenance charges and local government taxes that the tenant is required to cover. These should be clearly disclosed to avoid any surprises.
Assigning/Sub-leasing
Subleasing (or subletting) occurs when you, as a tenant, lease all or part of your rented space to a sub-tenant. This arrangement must typically receive the landlord’s written consent, and the lease should clearly outline any conditions and liabilities related to such an arrangement.
If you plan on subleasing, ensure that every detail is properly documented. Any liabilities for damages caused by a sub-tenant should be clearly assigned to avoid potential disputes.
Given evolving market conditions in 2025, Commercial Lease Agreements are increasingly incorporating provisions that address flexible workspace arrangements. Many modern leases now account for hybrid office setups and co-working spaces, reflecting the dynamic nature of today’s business environments. For more insights on adapting legal agreements to modern practices, check out our comprehensive guide on legal compliance for businesses in 2025.
| Example Sandy is planning on renting a small office space from Patrick to run her consultancy firm. Sandy has a lawyer survey the space and discovers a leak in the roof that has led to mildew issues, which could adversely affect her and her clients’ health. Sandy brings the issue to Patrick’s attention. Initially, Patrick insists that it is Sandy’s responsibility to handle repairs because she is the tenant. However, Sandy counters that, according to a fair negotiation, structural repairs should be the landlord’s responsibility while general maintenance remains with the tenant. Following this, Sandy’s lawyer drafts a Commercial Lease Agreement that explicitly delineates these responsibilities. Not wanting to lose a quality tenant, Patrick agrees to the negotiated terms, which then help both parties quickly resolve any future maintenance disputes by referring back to the written agreement. |
Key Takeaways
Securing the right property and having a robust Commercial Lease in place are vital for the smooth operation and long-term success of your business. A well-drafted lease not only protects your rights but also provides clear guidelines for dispute resolution, maintenance responsibilities and cost allocations.
Without a written Commercial Lease Agreement, you risk compromising your legal position as a tenant and facing unclear or unfavourable terms in disputes.
Engaging a legal expert early on can help ensure that all your needs and rights are thoroughly covered. For further insights into how to protect your business legally, check out our articles on Legal Requirements for Starting a Business and our range of contract review services available here.
Next Steps
At Sprintlaw, we provide a comprehensive package that caters to all your Commercial Lease Agreement needs. Contact our team today to discover how we can support your business in securing favourable lease terms for 2025 and beyond.
If you would like a consultation on your leasing options – whether you’re a tenant or a landlord – please reach us at 1800 730 617 or via email at team@sprintlaw.com.au for a free, no-obligations chat.
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