Entering into a commercial lease is one of the most legally significant steps for any business operator. While many leases are presented as standardised documents, tenants should not assume they are non-negotiable. Each clause in a lease has legal implications, and failure to address these early can lead to costly disputes or restrictions later.
At Ensure Legal, we regularly advise clients on lease negotiations, focusing on protecting their legal rights while ensuring commercial viability. Below are key legal aspects every tenant should consider before signing a lease.
1. The Lease is a Legally Binding Contract
Once executed, a lease binds both parties to its terms for the entire lease period. Tenants should understand that a lease is not merely an agreement to pay rent—it is a detailed legal contract that governs rights, obligations, restrictions, and remedies. Legal advice should be sought before signing, especially for longer-term leases.
2. Negotiability of Lease Terms
Despite being labelled as “standard,” most lease terms can be negotiated. Common areas for negotiation include:
- Permitted Use – Defines what business activities are legally allowed on the premises.
- Rent and Outgoings – Including the legal basis for increases, apportionment of council rates, insurance, and other operating expenses.
- Term and Options – The legal right to renew and the procedures required to exercise renewal.
- Make Good Obligations – Legal requirements at the end of the lease, including reinstating the premises.
- Assignment and Subletting – Whether the tenant can transfer or sublet their lease, and the legal conditions for doing so.
Negotiating these terms can mitigate future legal risks.
3. Legal Roles of Each Party in the Lease
- Tenant (Lessee): Must meet contractual obligations and ensure compliance with use, payment, and maintenance terms.
- Landlord (Lessor): Often seeks to maximise rent and minimise liability, requiring strong legal clauses in their favour.
- Letting/Managing Agent: Typically acts on behalf of the landlord and is not an independent advisor for the tenant.
- Landlord’s Solicitor: Prepares the lease to protect the landlord’s legal position, often at the tenant’s cost.
Understanding these roles helps tenants identify potential biases in the lease structure.
4. Hidden Legal Liabilities
Many leases contain clauses that may seem minor but carry significant legal and financial consequences:
- Indemnity Clauses – Can expose tenants to wide-ranging liabilities, even for matters outside their control.
- Maintenance Obligations – Legal duties to repair and maintain, which may exceed what is reasonably expected.
- Personal Guarantees – Binding the individual directors or business owners personally, beyond the company.
It is essential to assess these clauses with legal counsel to fully understand their scope and implications.
5. Legal Recourse and Termination Rights
Legal remedies available to each party in the event of breach or early termination should be clearly identified. Tenants should look for:
- Exit clauses or break options
- Remedies for landlord breaches
- Procedures for dispute resolution (e.g., mediation or arbitration clauses)
6. Importance of Tailored Legal Advice
Each business is different, and so are its legal needs. A properly reviewed and negotiated lease helps ensure long-term operational security. Relying solely on agents or templated documents risks overlooking critical legal nuances.
At Ensure Legal, we assist clients in understanding the legal framework governing commercial leases in Queensland. Our goal is not only to protect your legal interests but also to support your business success.
Contact us today to discuss your lease or to arrange a legal review before signing any lease documents.
