If you own commercial premises that you rent out, a carefully drafted commercial lease agreement for landlords is essential. Commercial lease agreements are usually prepared by the landlord (or their legal representative) and should be structured to protect your investment, meet legislative requirements, and balance the rights of both parties.
This article outlines key considerations for landlords to manage risk and provide clarity when leasing commercial property. We focus on responsibilities for repairs and maintenance, make good provisions, and other critical terms to help you avoid disputes.
Table of Contents
- What Is a Commercial Lease Agreement?
- Key Lease Terms Landlords Should Include
- Repairs and Maintenance Responsibilities
- Make Good Provisions
- Why Legal Advice Is Important
- Conclusion
What Is a Commercial Lease Agreement?
A commercial lease agreement is a legal contract between a landlord and tenant outlining the terms and conditions of leasing commercial property. It defines each party’s rights and responsibilities during the lease period and after its termination.
For landlords, this agreement is your primary tool for managing risk, ensuring compliance with legislation, and maintaining control over how your property is used.
Key Lease Terms Landlords Should Include
Some of the most important provisions in a commercial lease agreement for landlords include:
- Description of the premises and its permitted use
- Common areas – identification and rights of access
- Rent amounts, how rent increases are calculated, and payment frequency
- Security deposit or guarantee requirements
- Lease term and options to renew, including how options must be exercised
- Responsibility for outgoings (e.g. utilities, council rates, strata fees)
- Repairs, maintenance, and make good clauses
- Risk allocation (liability, indemnities)
- Insurance obligations
- Termination conditions, including breaches, non-payment of rent, and insolvency
To improve clarity, use plain language where possible and include a list of definitions. Also consider preparing a detailed condition report (with photos) at the beginning of the lease.
Repairs and Maintenance Responsibilities
Repairs and maintenance obligations are a common source of disputes. The lease should clearly distinguish between general repairs and structural repairs.
Typically, tenants are responsible for general maintenance beyond fair wear and tear—for example, cleaning, servicing equipment, and repairing minor damage. The landlord is usually responsible for structural elements like the foundation, roof, and support columns.
‘Fair wear and tear’ should be defined in the lease, and responsibility for maintaining plant and equipment (e.g. air conditioning) should be specified to avoid confusion.
Make Good Provisions
Make good clauses require the tenant to return the premises to its original condition (excluding fair wear and tear) at the end of the lease.
The lease should specify what must be removed—like personal property or fixtures—and what repairs must be carried out. A condition report is vital in managing this process fairly.
Some tenants may resist removing improvements. In such cases, landlords can choose to allow fixtures to remain, provided the lease allows for this flexibility.
Why Legal Advice Is Important
Commercial leasing laws vary depending on the type of premises and location. For example, retail leasing legislation may apply to certain tenancies, requiring mandatory disclosure and compliance with specific regulations.
Legal advice helps ensure your lease complies with current laws and protects your long-term interests as a landlord.
Conclusion
A well-drafted commercial lease agreement for landlords is key to avoiding disputes and maintaining a strong business relationship with your tenant. By clearly setting out the terms of the lease—including repair obligations and make good clauses—you reduce ambiguity and manage risk more effectively.
If you or someone you know needs legal advice on commercial leases, call 02 9266 0688 or email [email protected].