Signing a commercial lease is one of the biggest financial commitments a business can make. A typical retail or commercial lease in Victoria runs for 5 to 10 years, with total rent obligations that can exceed hundreds of thousands of dollars. As commercial leasing lawyers in Frankston, we regularly review leases for tenants and landlords across Melbourne and the Mornington Peninsula.
Why You Should Have a Lawyer Review Your Lease
Unlike residential tenancies, commercial leases are largely unregulated — the parties are free to negotiate almost any terms they choose. This means the lease document itself governs the entire relationship, and unfavourable clauses can be extremely costly to your business.
Common issues we identify when reviewing commercial leases include:
- Rent review clauses — some leases include ratchet clauses that prevent rent from decreasing, even if market rent falls. Others use CPI increases that compound significantly over a long lease term.
- Outgoings — the lease may require you to pay a share of building outgoings including insurance, management fees, maintenance, and land tax. Without careful review, these can add 30-50% to your base rent.
- Make-good obligations — at the end of the lease, you may be required to strip out all fitout and return the premises to their original condition. This can cost tens of thousands of dollars.
- Permitted use clauses — restrictive use clauses can prevent you from diversifying your business or may create problems if you want to assign the lease.
- Personal guarantees — landlords often require company directors to personally guarantee the lease obligations. This means your personal assets are at risk if the business fails.
The Retail Leases Act 2003
If your premises fall within the definition of “retail premises” under the Retail Leases Act 2003 (Vic), you have additional protections. The Act requires the landlord to provide a disclosure statement before the lease is signed, limits certain types of outgoings recoveries, provides for a minimum 5-year lease term, and gives tenants the right to refer disputes to the Victorian Civil and Administrative Tribunal (VCAT).
However, not all commercial leases are retail leases. Office premises, warehouses, and industrial properties generally fall outside the Act, which means fewer automatic protections for the tenant.
Key Terms to Negotiate
Before signing, these are the terms most worth negotiating:
- Rent-free or reduced-rent period — to cover your fitout period and initial trading
- Option to renew — the right to extend the lease on agreed terms
- Assignment rights — the ability to transfer the lease if you sell the business
- Cap on outgoings — a limit on what the landlord can recover
- Make-good scope — narrowing the obligation to “fair wear and tear” rather than full strip-out
Talk to a Commercial Lease Lawyer
Professional Edge Lawyers reviews and negotiates commercial and retail leases from our Frankston office. Whether you are a tenant signing a new lease or a landlord preparing one, we ensure the terms protect your interests. We serve businesses across Melbourne, the Mornington Peninsula, and greater Victoria. Contact us on 1800 776 529 before you sign.
