Reading time: 3 minutes

A commercial lease is a binding agreement between the landlord (owner of the property) and the tenant for the lease of the premises for non-retail use. If you own a commercial premises, it is likely that you will provide the lease document to the tenant. The following discussion is an overview of the important covenants in the lease, particularly clauses landlords should review in a commercial lease. Note that a standard commercial lease does not fall under the protection of retail lease legislation and therefore there are no implied covenants in favour of the tenant.

1. Rent Review

The lease usually contains a provision for the rent to increase on an annual basis. The method of rental increase may be by market rent review, Consumer Price Index or fixed percentage increase. It is important that the procedure for rent review is clearly set out in the lease to avoid any dispute or, in the worst case, the court will deem the rent review void for ambiguity.  

2. Fitout

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

  • The tenant has provided you with some form of security (bank guarantee/ security deposit); 
  • The tenant has taken out insurance for public risk; 
  • The tenant gives you the lease document duly executed; and 
  • You (the landlord) approve the tenant’s plans and drawings of its fit-out works.  

3. Insurance

The usual minimum insurance requirement is for public risk (current amount of cover is $20 million) and plate glass insurance. You may also consider requiring the tenant to provide you with a copy of its insurance policy on an annual basis to ensure that it complies with this obligation.

4. Inspection

As a landlord, you have a right to inspect the premises noting you may only enter the premises during the times and upon providing the relevant notice to the tenant as set out in the lease. It is usual for a landlord to enter the premises for the purpose of carrying out an inspection of the state of repair of the premises. In the event of an emergency, you are not required to give notice. The tenant may try to limit your frequency to inspect the premises.  

5. Extension of Term

If the lease term is broken up into an initial term and an option term, you need to consider the timeframe in which the tenant must exercise its option, and if that time frame suits you in terms of sourcing a new tenant in the event the option lease is not taken.

***

If you own a commercial premises that you intend to lease out, it is essential that you understand both your and your tenant’s obligations under the lease. If you require a lease to be prepared with favorable terms tailored specifically to your requirements, get in touch with our commercial leasing lawyers on 1300 544 755.

Webinars

The COVID-19 Vaccine Rollout: Considerations for Employers

Thursday 22 April | 11:00 - 11:45am

Online
Are you a business owner or employer? Attend this webinar to learn about what you need to know about the COVID-19 vaccine rollout.
Register Now

How to Recover Unpaid Invoices

Thursday 13 May | 11:00 - 11:45am

Online
What do you do if your customers don't pay your invoices? Attend this webinar to learn about how to recover unpaid invoices.
Register Now

About LegalVision: LegalVision is a tech-driven, full-service commercial law firm that uses technology to deliver a faster, better quality and more cost-effective client experience.

The majority of our clients are LVConnect members. By becoming a member, you can stay ahead of legal issues while staying on top of costs. From just $119 per week, get all your contracts sorted, trade marks registered and questions answered by experienced business lawyers.

Learn more about LVConnect

Need Legal Help? Get a Free Fixed-Fee Quote

If you would like to receive a free fixed-fee quote or get in touch with our team, fill out the form below.

  • 2020 Excellence in Technology & Innovation – Finalist – Australasian Law Awards 2020 Excellence in Technology & Innovation Finalist – Australasian Law Awards
  • 2020 Employer of Choice – Winner – Australasian Lawyer 2020 Employer of Choice Winner – Australasian Lawyer
  • 2020 Fastest Growing Law Firm - Financial Times APAC 500 2020 Fastest Growing Law Firm - Financial Times APAC 500
  • 2020 AFR Fast 100 List - Australian Financial Review 2020 AFR Fast 100 List - Australian Financial Review
  • 2020 Law Firm of the Year Finalist - Australasian Law Awards 2020 Law Firm of the Year Finalist - Australasian Law Awards
  • Most Innovative Law Firm - 2019 Australasian Lawyer 2019 Most Innovative Firm - Australasian Lawyer