10 Questions Every Australian Tenant Should Ask Before Signing a Commercial Lease

Signing a commercial lease is one of the biggest financial commitments most business owners make. You're locking in a cost for three, five, sometimes ten years. And unlike buying a house where there's a cooling-off period and a standard contract everyone understands, commercial leases are individually negotiated documents with no standard form. Every lease is different.

I've seen tenants sign leases without fully understanding what they were committing to, and I've seen the consequences when something goes wrong two or three years later. A clause they didn't read properly. A cost they didn't know about. A deadline they missed because nobody flagged it.

Most of these problems could have been avoided by asking the right questions before signing. Here are the ten I'd want answered if I were taking on a new tenancy.

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1. What Is My Total Occupancy Cost?

Don't just look at the rent. Your total occupancy cost includes base rent, outgoings, GST, any marketing fund contributions (common in retail), insurance requirements, and any other charges the lease imposes. Ask the landlord or agent for a full breakdown of estimated annual costs so you can compare this tenancy to alternatives on a like-for-like basis.

I've seen tenants choose a space because the rent was $10,000 per year cheaper than another option, only to find the outgoings were $15,000 higher. The "cheaper" space ended up costing more.

2. How Do Rent Reviews Work?

Your rent will change during the lease. How it changes depends on the rent review mechanism in your lease. Is it a fixed percentage increase each year? Linked to CPI? Subject to a market review where an independent valuer sets the new rent?

Each method has different implications. Fixed increases give you certainty but can compound quickly. CPI reviews are generally moderate but can spike when inflation runs high. Market reviews can go either way, but watch out for ratchet clauses that say your rent can only go up at review, never down. That means even if the market drops, you're stuck at the higher figure.

3. What Are My Make Good Obligations?

When the lease ends, what condition does the landlord expect the space returned in? This is your make good clause, and it can be one of the most expensive parts of the entire lease. Some clauses require you to strip the premises back to a bare shell and remove every fixture and fitting you installed.

If you're fitting out a food and beverage tenancy with a commercial kitchen, extraction system, and specialised plumbing, your make good cost at the end could be $50,000 to $100,000 or more. Know this number before you commit to the fit-out, not when you're handing back the keys.

4. Do I Have a Break Clause?

A break clause gives you the right to end the lease early under certain conditions. Not every lease has one, and if yours doesn't, you're committed for the full term unless you can negotiate an exit, assign the lease, or sublet.

If there is a break clause, understand exactly what's required to exercise it. There will be a notice period (often 6 to 12 months), conditions you must meet (rent up to date, no breach), and a specific method of giving notice. Miss the deadline or get the process wrong and you lose the right entirely.

5. What Happens at Renewal?

Does your lease include an option to renew? If so, for how long, and what rent applies during the renewal term? Options are valuable because they give you certainty that you can stay in the space, but they're not automatic. You typically need to exercise the option in writing within a specific window, often months before the current term expires.

If you miss the option exercise deadline, you may lose the right to renew entirely. A lease summary report from Lease Intelligence flags these critical dates so you can track them well in advance instead of scrambling when you realise the deadline is next week.

6. Can I Assign or Sublet?

If your business circumstances change and you need to exit the lease, can you transfer it to someone else (assignment) or rent out part of the space (subletting)? Most leases require the landlord's consent, and the lease will set out the conditions for that consent.

Understanding these rights upfront matters because if you ever need to sell the business, the ability to assign the lease is often a key part of the deal. If your lease makes assignment difficult or expensive, it affects the saleability of your business.

7. What Can I Actually Use the Space For?

Your lease will include a "permitted use" clause that defines what activities you can carry out in the premises. This might be broad ("general retail") or very specific ("sale of women's fashion accessories"). If it's narrow and your business evolves, you might find yourself in breach of the lease for selling something outside the permitted use.

In a shopping centre, the landlord controls the tenancy mix and will often restrict your permitted use to protect other tenants. If you're a cafe, they might prevent you from selling certain food categories that compete with another tenancy. Check this carefully and make sure the permitted use covers everything you plan to do, now and in the foreseeable future.

In some cases, you may also be able to negotiate exclusivity, meaning you’re the only tenant in the centre allowed to sell a particular product or operate a certain type of business. This can be valuable if you’re in a competitive category, but it needs to be clearly documented in the lease.

8. What Insurance Do I Need?

Commercial leases require tenants to hold certain insurance policies and maintain them for the life of the lease. Common requirements include public liability (often $10 million to $20 million), plate glass insurance, contents insurance, and sometimes workers' compensation and business interruption cover.

Get quotes for the required insurance before you sign. It's a real cost that needs to go into your occupancy budget. And check that the policy amounts and types specified in the lease are actually available and affordable for your business.

9. How Are Disputes Resolved?

Things go wrong in commercial tenancies. Maintenance doesn't get done, costs are disputed, obligations are unclear. Your lease should set out a process for resolving disputes, whether that's mediation, arbitration, or going straight to legal proceedings.

If you're a retail tenant covered by your state's Retail Leases Act, you likely have access to a Small Business Commissioner or equivalent body that provides low-cost dispute resolution. If you're on a standard commercial lease without retail protections, the dispute resolution mechanism in your lease is what you've got.

10. Have I Had the Lease Independently Reviewed?

This is the most important question on the list. A commercial lease is a legal document that creates binding obligations for years. Reading it yourself is a good start, but unless you review leases professionally, you will miss things. Not because you're not smart enough, but because the implications of certain clauses only become apparent when you've seen them play out across hundreds of tenancies.

One option is to engage a lawyer to review the lease, which can be worthwhile particularly for more complex or high-value transactions. The downside is that it can be expensive and often focuses more on legal risk than the practical, day-to-day commercial impact of the lease.

When I was managing large retail portfolios, I saw sophisticated business operators get caught by clauses they didn't understand or didn't think applied to them.

A lease summary report gives you a structured breakdown of every key term, obligation, and critical date in your lease, presented in plain English so you can see exactly what you're signing up for.

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The Cost of Not Asking

Every one of these questions has a dollar figure attached to it. Miss your option deadline and you might lose the right to stay in a location you've spent years building a customer base around. Overlook a broad make good clause and you're facing a five-figure bill at lease end. Sign without understanding your outgoings liability and your business plan is based on the wrong numbers from day one.

The time to ask these questions is before you sign, when you still have leverage to negotiate. Once the lease is executed, your position changes entirely.

If you want all of these questions answered for your specific lease, a lease summary report from Lease Intelligence starts at $99. Head to leaseintelligence.com.au to upload your lease and get clarity before you commit.