Outside the Retail Leases Act, the document is doing the work.
A commercial lease over an office, a warehouse or an industrial unit sits outside the disclosure and minimum-term protections the Retail Leases Act gives retail tenants. That freedom cuts both ways, and it is why the document matters so much to whichever side you are on.
We act on commercial premises — offices, warehouses, industrial units and mixed sites — for landlords and for tenants, though never for both parties to the same lease. Because the Retail Leases Act 1994 (NSW) does not apply, the parties have far more room to agree what they like. The practical consequence is that a commercial lease rewards careful drafting and punishes a template.
The general law still applies, and so do the unfair-contract-term provisions of the Australian Consumer Law where the tenant is a small business and the lease is a standard form. Freedom of contract is not the absence of law.
Rent review and outgoings
The rent review mechanism is the single clause most likely to be litigated years later. Fixed percentage, CPI, market review, or a combination — each behaves differently in a market that moves, and a mechanism that was uncontroversial at signing can become the whole dispute at the first review. Outgoings need to be defined, apportioned and made recoverable in terms that survive a change of tenant.
Assignment of lease, subletting and security
Most commercial leases permit assignment with the landlord's consent, not to be unreasonably withheld. What counts as reasonable is where the argument lives, and the answer depends on what the lease sets as the criteria. Where a tenant sells their business, the assignment provisions and the bank guarantee provisions are read together — and a landlord who releases the outgoing tenant without a replacement covenant has given something away.
- Landlord: define the criteria for consent rather than relying on a reasonableness test alone.
- Tenant: a lease that sets no criteria leaves you at the mercy of an argument about what is reasonable, usually at the moment you are trying to sell.
- Both: deal with release of the outgoing tenant expressly. Silence favours the landlord, and a tenant who assigns without release stays on the hook.
Make good and default
Make good is agreed at the start and argued at the end, usually years later and often with a different property manager. A make good clause that does not describe the standard, the date and what happens to fixtures is a clause that will be negotiated again at the worst possible time.
On default, the lease sets out the notice, the period to remedy and what the landlord may do — and the steps have to be followed exactly. Re-entry is a remedy with real consequences if it turns out not to have been available.
Related matters
What landlords ask us about commercial leases.
How do we know whether our lease is retail or commercial?
It depends on the use of the premises and the schedule to the Retail Leases Act 1994 (NSW), not on what the parties call the lease. It is worth settling before the lease is drawn, because it changes the disclosure obligations, whether a minimum term applies and what outgoings can be recovered.
Can we refuse consent to an assignment?
Usually only on the grounds the lease allows, and where consent is not to be unreasonably withheld the question becomes what is reasonable in the circumstances. A lease that sets out the criteria — financial standing, experience, proposed use — gives a landlord far more room than one that relies on the reasonableness test alone.
Do the unfair contract term rules apply to a commercial lease?
They can. Where the tenant is a small business and the lease is a standard form contract, the unfair-contract-term provisions of the Australian Consumer Law may apply, and a term found unfair is void. It is one reason a heavily one-sided template is not the safe option it looks like.
The tenant has stopped paying. Can we change the locks?
Only if the right to re-enter has actually arisen and the process in the lease has been followed exactly. Re-entering without that right exposes a landlord to a claim, and the amount at stake is usually far larger than the arrears. Tell us the dates before you do anything.
Tell us what's happened.
Tell us about the premises, the tenant and where you are in the deal — and whether the lease has been drawn yet.
Information on this site is general in nature and is not legal advice, and may have been overtaken by a change in the law. Contacting us does not create a solicitor–client relationship.