Tenancy Agreements In Australia: A Comprehensive Guide For Landlords And Tenants

Whether you’re renting out a spare unit, moving into a new apartment, or negotiating a shop lease for your next venture, a clear tenancy agreement is essential. It sets the rules, protects everyone’s rights and-most importantly-helps avoid disputes before they start.

In Australia, residential and commercial tenancies sit under different legal frameworks and expectations. Understanding how they work, what to include, and the correct process to follow will save you time, money and stress.

In this guide, we’ll break down tenancy agreements in plain English-so you can sign with confidence and focus on what matters next.

What Is A Tenancy Agreement And How Does It Work?

A tenancy agreement (often called a lease) is a legally binding contract between a landlord (or lessor) and a tenant (or lessee). It gives the tenant the right to occupy the premises and sets out the terms both parties must follow.

Across Australia, there are two broad categories:

• Residential tenancies - covering houses, apartments and rooms. These are regulated by state and territory residential tenancy laws, which prescribe many standard terms (e.g. minimum notice periods, bond handling and your rights around repairs).
• Commercial and retail leases - covering premises used for business. While still subject to state and territory rules (and, for retail, additional protections), the terms are far more negotiable and tailored to the business’ needs.

Every tenancy agreement should cover the essentials, such as:

• The parties and the premises (including any common areas and parking)
• Lease type and term (fixed term vs periodic, plus any options to renew)
• Rent, payment dates, rent review mechanisms and any outgoings
• Bond, security or bank guarantee and how it’s held or called on
• Permitted use and any restrictions (e.g. no pets, no certain trading uses)
• Repairs, maintenance and who is responsible for what
• Alterations and fit-out (for commercial premises)
• Assignment, subletting and transfer conditions
• Landlord entry rights and notice requirements
• Insurance requirements and risk allocation
• Default events, breach procedures and termination rights
• “Make good” obligations at the end of the lease

Retail leases have additional disclosure and fairness rules in each state or territory. For example in NSW, retail landlords must comply with the Retail Leases Act, which includes pre-lease disclosure, limits on certain costs, and rules about rent reviews. Similar retail legislation exists across Australia, with local differences you’ll need to follow.

Residential Vs Commercial Tenancies: Key Differences You Should Know

While the core idea is the same-exclusive use of premises in exchange for rent-there are important differences in how residential and commercial leases operate.

1) Regulation And Negotiation

Residential leases are heavily regulated. Many terms are prescribed or cannot be contracted out of. Standard forms are often required, and each state/territory has set rules about bonds, inspections, repairs and notice periods.

Commercial leases are far more negotiable. Terms around rent, outgoings, fit-out, make good and assignment are typically tailored to the deal. If you’re leasing business premises, a tailored Commercial Tenancy Agreement helps ensure the terms reflect the true commercial bargain.

2) Bonds, Guarantees And Security

In residential settings, bonds are capped and must be lodged with the relevant bond authority. In commercial leases, landlords often require a bank guarantee or personal guarantee from directors (especially if the tenant is a company), as well as a rental bond.

3) Rent Reviews And Outgoings

Residential rent increases are limited by law and timing rules. In commercial arrangements, rent can be reviewed using CPI, fixed percentage increases or market rent-subject to any retail leasing rules-and tenants may pay some or all outgoings (rates, water, utilities, strata, cleaning and security).

4) Fit-Out, Alterations And Make Good

Residential tenants typically need consent to make alterations, and must return the premises in a reasonable state (less fair wear and tear). In commercial leases, fit-out costs, approvals, reinstatement and “make good” obligations are significant negotiation points.

5) Ending The Lease Or Leaving Early

Residential tenants and landlords must follow strict notice rules, and “break lease” fees are regulated. Commercial parties can agree to break clauses or negotiated exits. If you need to leave earlier than planned, check your rights and any agreed process-our guide on breaking a commercial lease explains the key steps and risks.

Step-By-Step: Setting Up A Tenancy Agreement Legally

Here’s a practical roadmap to get your lease in place the right way-whether you’re a landlord or a tenant.

Step 1: Confirm The Parties, Premises And Structure

Make sure the names and ACN/ABN (if applicable) are correct. If the tenant is a company, the landlord may seek a director’s personal guarantee. Double check the address, title details, car spaces, storage and any common areas included.

Step 2: Capture The Deal In Writing (HOA Or AFL)

For commercial deals, it’s common to start with a short “Heads of Agreement” (HOA) or an Agreement for Lease (AFL) if the space will be delivered in future or subject to works/approvals. Clarify rent, incentives, term, options, outgoings, permitted use, fit-out and make good early. If you’re at this stage, a quick Agreement for Lease review helps flag red flags before you commit.

Step 3: Prepare The Lease And Required Disclosures

Residential leases usually use a prescribed form with any permitted special conditions. Commercial leases are bespoke, and retail leases usually require a disclosure statement and timing rules around when documents are provided and signed.

Step 4: Check Compliance With Local Law

For residential, confirm bond caps, lodgement timeframes, condition report requirements, and rules on rent increases and entry rights. For retail premises, consider specific disclosure, fit-out and permitted cost rules in your state or territory. If in doubt, get advice before signing-fixing compliance problems later is much harder.

Step 5: Execute Correctly

If a company is a party, ensure execution is valid. In many cases, companies can sign under section 127 of the Corporations Act-see our plain-English explainer on signing under section 127. Incorrect signatures can render the lease unenforceable or undermine guarantees.

Step 6: Handle Money And Security Properly

Residential bonds must be lodged with the bond authority. For commercial leases, keep clear records of any bond, deposit or bank guarantee, and specify when and how they can be called on or released.

Step 7: Complete Condition Reports And Entry Procedures

Document the condition of the premises (photos help). Residential tenancies often require a formal condition report. For commercial leases, a thorough schedule of condition reduces end‑of‑lease disputes around make good.

Step 8: Register Or Lodge Where Required

Some states allow or require registration of longer commercial leases on title (often over three years). Registration can protect a tenant’s rights if the property is sold.

Step 9: Respect Privacy And Data Obligations

Landlords and property managers often collect sensitive personal information in applications and during the tenancy. If you handle personal information, you should have an up-to-date Privacy Policy and secure processes for storage, retention and access.

Common Clauses And Negotiation Points

Strong tenancy agreements balance risk fairly and spell out expectations. Here are key areas we often see negotiated.

Rent, Reviews And Incentives

Beyond base rent, leases set out how and when rent increases. For commercial tenants, typical methods include CPI, fixed percentage or market rent, often excluding “ratchet” clauses in retail. Incentives (fit-out contributions or rent-free periods) should be captured clearly to avoid misunderstandings.

Outgoings And Operating Costs

Who pays what-rates, utilities, waste, cleaning, security, strata levies-should be explicit. For retail, check local rules around recoverable outgoings and required estimates/adjustments.

Repairs, Maintenance And Compliance

Residential law puts many repair obligations on landlords, with strict timelines for urgent repairs. Commercial leases allocate responsibilities in detail-base building vs tenancy areas, air conditioning, fire safety, lifts, and compliance with laws relating to the permitted use.

Permitted Use, Alterations And Signage

Spell out the permitted use and obtain any council/planning approvals needed. If the tenant will alter the premises or install signage, include approval processes, design standards and removal/make good requirements.

Assignment, Subletting And Change Of Control

Tenants often want flexibility to assign the lease (e.g. on a business sale) or sublet space. Landlords usually require approval and reasonable criteria (financial capacity and reputation), plus costs and release terms. In some cases, a short-term space arrangement is better captured by a Property Licence Agreement rather than a full lease.

Default, Termination And Make Good

If things go wrong, clarity helps. Set out breach notices, rectification timeframes, early termination rights, lockout rights (where permitted) and how make good is measured and costed. Where a break right is agreed, define the trigger dates, fees and process precisely.

Ending A Tenancy: Notices, Breach And Early Exit

Leases end in a few common ways: expiry without renewal, termination for breach, negotiated surrender, or an agreed break right. Each path has process and notice requirements.

Residential Tenancies

Ending a residential tenancy depends on whether it’s a fixed-term or periodic agreement. Notice periods vary across states and territories. If you’re on a rolling arrangement, it’s worth reviewing the typical month-to-month lease notice requirements in Australia to avoid invalid notices.

Commercial And Retail Leases

Commercial leases usually set bespoke notice rules for expiry, breach and termination. If you’re in NSW, our guide to lease termination notices in NSW explains the key timing rules and pitfalls. If you need to exit early, consider whether you have a break right, can negotiate a surrender, assign the lease, or otherwise follow the process for a compliant early exit.

Renewals And Holding Over

Commercial tenants may have options to renew. These are strictly time‑sensitive-miss the notice window and the right may lapse. If a tenant stays in the premises after expiry, the lease may move to a “holding over” (usually monthly) arrangement on the same terms. Parties should confirm rent, outgoings and termination rights in writing during any holdover period to avoid surprises.

Condition, Keys And Final Accounts

At handover, tenants typically return keys, remove their property, complete make good and provide access for final inspections. Landlords reconcile rent, outgoings and any approved costs, then return bond or release bank guarantees according to the agreement and law.

What Legal Documents Might You Need Beyond The Lease?

Depending on your situation, the lease is just one part of the legal toolkit. You might also need:

• Agreement For Lease (AFL): Used when the lease will start later (e.g. after landlord works, DA approvals or practical completion). It locks in the deal and milestones before the tenant moves in. A short HOA can also help at the negotiation stage; consider a targeted Agreement for Lease review if you’re close to terms.
• Deed Of Guarantee And Indemnity: If the tenant is a company, landlords often require director guarantees. A tailored Deed of Guarantee and Indemnity clarifies liability and claims.
• Commercial Sublease: If you plan to sublet part of the premises, set clear rules in a Commercial Sublease Agreement and obtain landlord consent as required by the head lease.
• Lease Surrender: When ending a lease early by agreement, a Lease Surrender Agreement documents the exit terms, fees and release of claims.
• Variation Or Extension Deed: If you change rent, terms or extend the lease, formalise the change in writing so there’s no ambiguity later.
• Property Licence: For short-term or shared use (e.g. desks, kiosks, pop-ups), a licence may suit better than a lease-see Property Licence Agreement.
• Commercial Lease: If you’re starting from scratch, a bespoke Commercial Tenancy Agreement (or retail lease) tailored to your state and use is the backbone of a safe tenancy.

Not every situation needs all these documents, but having the right ones-drafted clearly and signed properly-goes a long way to preventing disputes.

Key Takeaways

• A tenancy agreement sets clear, binding rules for occupation, rent, responsibilities and how issues are handled if things go wrong.
• Residential tenancies are heavily regulated, while commercial and retail leases are more negotiable but must still comply with local laws and retail leasing rules.
• Get the foundations right: document the deal early (HOA/AFL), draft the lease carefully, execute correctly and follow bond, disclosure and registration requirements.
• Negotiate key clauses-rent reviews, outgoings, repairs, permitted use, assignment and make good-so they reflect your real expectations and risk tolerance.
• Plan your exit before you enter: understand notice periods, options to renew, break rights and processes for surrender, assignment or subletting.
• Protect data collected from applications and tenants with an appropriate Privacy Policy and secure handling practices.
• When in doubt, get advice early-fixing lease problems later is harder and more expensive than setting things up properly at the start.

If you’d like a consultation on tenancy agreements-residential or commercial-reach out to us at 1800 730 617 or team@sprintlaw.com.au for a free, no‑obligations chat.