Skip to content

Key Clauses Landlords Should Review in a Commercial Lease

In Short

  • Rent Review & Security: Leases often include annual rent reviews, with tenant security provided through bonds or guarantees.
  • Fitout & Insurance: Ensure fit-out conditions, insurance proof, and compliance are met before tenant access.
  • Inspection & Extension: Landlords can inspect the premises and must consider option terms for lease extension.

Tips for Businesses

Ensure key lease clauses are clear to protect your interests. Review rent increases, tenant security, insurance requirements, and fit-out conditions. Conduct regular inspections and monitor lease extension terms to maintain a strong landlord-tenant relationship. Legal advice is recommended for tailored lease agreements.


Table of Contents

A commercial lease is a binding agreement between the landlord (property owner) and the tenant to lease the premises for non-retail use. As a commercial property owner, you will likely provide the lease document to the tenant. This article outlines the key covenants in the lease, focusing on the clauses landlords should review in a commercial lease. 

Note that a standard commercial lease is not covered by retail lease legislation, so there are no implied covenants in favour of the tenant.

1. Rent Review

The lease usually contains a provision for the rent to increase annually. The method of rent review may be:

  • by a fixed percentage (such as 3% or 4%);
  • by the consumer price index (CPI) with reference to the inflation rate; or
  • according to a market rent review.

2. Security

When you grant a commercial lease to a tenant, require them to provide security through a cash bond or bank guarantee, along with personal guarantees. The lease agreement typically specifies the requirements for a cash bond or bank guarantee. A cash bond is a lump sum deposited into the landlord’s or real estate agent’s nominated account, while a bank guarantee is issued by a bank or financial institution.

Each type of security has its own pros and cons, so you should decide on a case-by-case basis which to accept as security for the tenant’s lease obligations. Make sure the tenant provides the agreed-upon security before the handover date.

Obtaining security under the lease offers several benefits. It protects against potential losses, such as unpaid rent, repair costs, or legal fees, if the tenant fails to meet their lease obligations or vacates early. 

Continue reading this article below the form
Loading form

3. Fitout

If the tenant requires a fit-out of its premises, you should not grant them early access to the premises before the commencement date until: 

  • the tenant has provided you with some form of security; 
  • the tenant has taken out insurance for public risk and plate glass; 
  • the tenant provides you the lease document duly executed; and 
  • you approve the tenant’s plans and drawings of its fit-out works.  

4. Insurance

Your tenant should have public risk and plate glass insurance at a minimum. Additional insurance may be necessary based on the following:

  • the tenant’s business size; 
  • the premises’ replacement costs; and 
  • potential liabilities, such as fire, business interruption, or environmental risks. 

You must ensure that the tenant provides proof of insurance before they gain access to the premises. Confirm with your insurers that the coverage is adequate. You may also require the tenant to submit a copy of their insurance policy annually to verify ongoing compliance with this obligation.

5. Inspection

As a landlord, you have the right to inspect the premises but must follow the lease terms regarding timing and notice to the tenant. Typically, landlords conduct inspections to assess the state of repair of the premises. In emergencies, you can enter without providing notice. Be aware that tenants might try to limit how often you can inspect the property.

6. Extension of Term

If the lease includes an initial term followed by an option term, consider the timeframe for the tenant to exercise their option. Additionally, think about whether it aligns with your plans for finding a new tenant if the option is not exercised. Typically, tenants must exercise the option between six and three months before the lease expires.

Key Takeaways

Reviewing key clauses in a commercial lease helps you protect your interests and maintain clear agreements with tenants. Understanding rent reviews, security, fit-out conditions, insurance, inspections, and extension terms can help you better manage risks and ensure compliance. Careful negotiation and legal guidance will also help you establish a strong foundation for successful leasing.

If you require a lease prepared with favourable terms tailored specifically to your requirements, our experienced leasing lawyers can assist as part of our LegalVision membership. For a low monthly fee, you will have unlimited access to lawyers to answer your questions and draft and review your documents. Call us today at 1300 544 755 or visit our membership page

Frequently Asked Questions

What are common rent review methods in a commercial lease?

Rent reviews may occur annually through fixed percentages, CPI (inflation rate), or market rent reviews.

What types of security are required from tenants?

Tenants typically provide security via a cash bond, bank guarantee, and personal guarantees.

Register for our free webinars

Demystifying M&A: What Every Business Owner Should Know

Online
Understand the essentials of mergers and acquisitions and protect your business value. Register for our free webinar.
Register Now

Social Media Compliance: Safeguard Your Brand and Avoid Common Pitfalls

Online
Avoid legal pitfalls in social media marketing and safeguard your brand. Register for our free webinar.
Register Now

Building a Strong Startup: Ask a Lawyer and Founder Your Tough Questions

Stone & Chalk Tech Central, Level 1 - 477 Pitt St Haymarket 2000
Join LegalVision and Bluebird at the Spark Festival to ask a lawyer and founder your startup questions. Register now.
Register Now

Construction Industry Update: What To Expect in 2026

Online
Stay ahead of major construction regulatory changes. Register for our free webinar.
Register Now
See more webinars >
Lota Tuipulotu

Lota Tuipulotu

Read all articles by Lota

About LegalVision

LegalVision is an innovative commercial law firm that provides businesses with affordable, unlimited and ongoing legal assistance through our membership. We operate in Australia, the United Kingdom and New Zealand.

Learn more

We’re an award-winning law firm

  • Award

    2025 Future of Legal Services Innovation Finalist - Legal Innovation Awards

  • Award

    2025 Employer of Choice - Australasian Lawyer

  • Award

    2024 Law Company of the Year Finalist - The Lawyer Awards

  • Award

    2024 Law Firm of the Year Finalist - Modern Law Private Client Awards

  • Award

    2022 Law Firm of the Year - Australasian Law Awards