Yes. A commercial lease is one of the largest financial commitments your business will make, and it is drafted by the landlord’s solicitors to protect the landlord’s interests. A commercial lease lawyer reviews the document from your side of the table, identifies clauses that could cost you thousands, negotiates better terms, and ensures you understand exactly what you are agreeing to before you sign. The cost of legal review is a fraction of what a bad lease can cost you over its term.
We see it regularly. A business owner finds the perfect premises, agrees on a rent figure with the landlord, receives a 40-page lease document, skims through it over a weekend, and signs. Six months later, they discover a rent review clause that allows unlimited increases, a make-good obligation that will cost $80,000, or an outgoings charge they never budgeted for.
The lease looked straightforward. The agent said it was “standard.” But standard for whom? Every commercial lease in Australia is drafted to favour the landlord. That is not a criticism of landlords. It is simply how the process works. The landlord’s solicitors prepare the document, and it reflects the landlord’s interests at every turn. Without someone reviewing it from your perspective, you are agreeing to terms you may not fully understand and accepting risks you have not properly assessed.
If you are looking for a commercial lease lawyer to review your lease or advise on a new tenancy, visit https://dfglegal.com.au/como/ to learn how we can help.
This guide explains what a lease lawyer actually does, the specific clauses that catch tenants out, and why the investment in legal advice almost always pays for itself many times over.
Quick Reference: What a Lease Lawyer Reviews vs. What Most Tenants Check
What Most Tenants Check What a Lease Lawyer Also Checks Rent amount Rent review mechanism (fixed, CPI, market, ratchet) Lease term Option exercise deadlines and conditions Bond amount Whether the bond can be applied to make-good costs Permitted use (briefly) Whether the permitted use is broad enough for future changes Start date Conditions precedent that must be met before the lease commences Outgoings (headline figure) What categories of outgoings are included, capped, or uncapped Make-good (if noticed at all) Specific make-good obligations, whether a cap can be negotiated, depreciation of fitout Assignment clause (rarely) Whether the landlord can unreasonably withhold consent, recapture provisions Guarantee requirements Personal guarantee scope, whether it survives assignment Dispute resolution Mediation, tribunal, or court jurisdiction for disputes
The right column is where the money is. These are the clauses that determine your total cost of occupancy over the life of the lease, not just the rent figure you agreed on verbally.
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What a Commercial Lease Lawyer Actually Does
A common misconception is that a lease lawyer simply reads the document and tells you whether to sign. That is like saying a mechanic simply looks at your car and tells you whether to drive it. The value is in the detail.
Reviewing the Lease Document
The first step is a thorough review of the entire lease, including the main lease document, any annexures, the disclosure statement (for retail leases), and any side agreements or letters of offer. A commercial lease typically runs between 30 and 60 pages, and every clause interacts with the others.
Your lawyer reads the lease with one question in mind: what could go wrong for the tenant, and how badly?
Key areas of focus include:
- The rent review mechanism and whether rent can only go up, never down
- The scope and cost of make-good obligations at the end of the lease
- Outgoings, including which categories are recoverable and whether they are capped
- Personal guarantees and whether directors or owners are personally liable
- Assignment and subletting provisions
- Option to renew terms and the exact process for exercising them
- Default and termination clauses, including what constitutes a breach
- Insurance requirements and who bears the cost
- The landlord’s obligations for structural repairs and maintenance
Identifying Problem Clauses
Not every clause in a lease is negotiable, but many are. Your lawyer identifies the clauses that pose the greatest financial or operational risk and advises you on which ones to push back on.
Some clauses are genuinely problematic. Others are simply poorly drafted and create ambiguity that could be exploited later. A good lawyer spots both.
Examples of problem clauses we commonly see:
- Ratchet clauses that prevent rent from decreasing at a market review, even if the market has fallen
- Demolition clauses that allow the landlord to terminate the lease with minimal notice if they decide to redevelop
- Relocation clauses that give the landlord the right to move you to different premises within a shopping centre or complex
- Uncapped outgoings that can increase without limit year on year
- Broad default provisions that allow the landlord to terminate for minor breaches
- Make-good obligations that require full restoration to base building condition regardless of the tenant’s improvements
Negotiating Better Terms
Once the problem clauses are identified, your lawyer prepares a list of proposed amendments and negotiates with the landlord’s solicitors. This is not an adversarial process. It is a professional negotiation between two parties who both want the lease to proceed, but on fair terms.
Common negotiation outcomes include:
- Capping rent increases at a fixed percentage instead of uncapped market reviews
- Limiting the scope of make-good or negotiating a financial cap
- Removing or narrowing demolition and relocation clauses
- Ensuring outgoings are defined and capped
- Limiting the scope and duration of personal guarantees
- Securing a broader permitted use clause
- Adding a break clause or early termination option
The landlord will not agree to everything. But in our experience, most landlords and their solicitors expect a certain level of negotiation and have room to move on key terms. A tenant who accepts the lease as drafted is leaving money on the table.
The Clauses That Cost Tenants the Most Money
Rent Review Clauses
The rent you agree to today is not the rent you will pay for the life of the lease. Rent reviews determine how your rent changes over time, and the method used has an enormous impact on your total occupancy cost.
Review Method
How It Works
5-Year Impact on $100,000 Base Rent Fixed 3% p.a. Fixed 4% p.a. CPI-linked Market review Market review with ratchet Rent increases by 3% every year Total rent: $530,914 Rent increases by 4% every year Total rent: 541,632IncreasestiedtoConsumerPriceIndexVaries.At3.5%avgCPI:~536,000 Rent adjusted to current market value Unpredictable. Could go up or down Market review, but rent cannot decrease All the downside risk, none of the upside
Over a five-year lease, the difference between 3% and 4% fixed increases on $100,000 base rent is over $10,000. Over a ten-year lease, it is over $30,000. These are not trivial sums, and they are entirely determined by a single clause in your lease.
Make-Good Obligations
Make-good is the requirement to return the premises to their original condition when you vacate. After years of customization, this can mean stripping out your entire fitout, removing cabling, repainting, replacing flooring, and restoring the space to a bare shell.
Typical make-good costs by premises size:
- Small office (50 to 100 sqm): $10,000 to $30,000
- Medium retail or office (100 to 300 sqm): $30,000 to $80,000
- Large tenancy (300+ sqm): $80,000 to $200,000+
These costs are rarely factored into the tenant’s budget at the start of the lease, which is exactly why they come as such a shock at the end. A lease lawyer will ensure you understand this obligation from day one and will negotiate to limit it where possible.
Personal Guarantees
Many commercial leases require the directors or owners of the tenant company to provide a personal guarantee. This means that if the company cannot pay the rent, the landlord can pursue the individuals personally. Their home, their savings, their other assets are all on the line.
Personal guarantees are sometimes unavoidable, particularly for new businesses without a trading history. But the scope of the guarantee is negotiable. A good lease lawyer can negotiate to:
- Limit the guarantee to a fixed dollar amount rather than the entire lease liability
- Include a sunset clause that releases the guarantee after a period of satisfactory performance
- Ensure the guarantee does not survive an approved assignment of the lease
- Exclude make-good costs from the scope of the guarantee
Retail Leases vs. Non-Retail Commercial Leases
The level of legal protection available to you depends on whether your lease is classified as a retail lease or a non-retail commercial lease.
In Western Australia, retail leases are governed by the Commercial Tenancy (Retail Shops) Agreements Act 1985. This legislation provides a range of statutory protections for retail tenants that do not apply to non-retail tenants.
Protection Retail Lease (WA) Non-Retail Commercial Lease Minimum lease term 5 years (with some exceptions) No minimum. Whatever is negotiated Landlord disclosure statement Required before the lease is signed Not required Outgoings disclosure Landlord must provide annual estimates and audited reconciliations No statutory requirement Ratchet clauses Prohibited under the Act Permitted unless negotiated out Rent review restrictions Market review cannot occur more than once a year No restriction Dispute resolution Access to State Administrative Tribunal (SAT) Depends on lease terms Unconscionable conduct Specific statutory provisions General law applies
If your lease is a non-retail commercial lease, you have significantly less statutory protection. This makes the role of your lease lawyer even more important, because the terms of the lease itself are essentially your only protection.
For further reading on the legal framework governing commercial leases in Australia, the Small Business Development Corporation (WA) provides practical guidance for tenants on lease negotiation and tenant rights.
When to Engage a Lease Lawyer
The short answer is: before you sign anything. But ideally, even earlier than that.
Before Signing a Heads of Agreement or Letter of Offer
Many tenants sign a heads of agreement (also called a letter of offer or term sheet) without legal advice, assuming it is non-binding. Some are. Many are not. A heads of agreement can lock you into key commercial terms, such as rent, lease term, and incentives, before you have had the full lease reviewed.
If the heads of agreement contains binding provisions, you may find that the terms you verbally discussed with the agent have been subtly changed, or that important issues have been left vague in a way that favours the landlord.
Before Signing the Lease
This is the most common point at which tenants engage a lawyer, and it is the minimum. Once you have the draft lease, your lawyer reviews it, identifies issues, and negotiates amendments before you sign.
The review process typically takes one to two weeks, depending on the complexity of the lease and the responsiveness of the landlord’s solicitors. Allow for this in your timeline. If the landlord pressures you to sign without adequate time for legal review, treat that as a red flag, not a reason to skip the review.
At Lease Renewal or Option Exercise
If your lease is approaching its expiry and you intend to exercise your option to renew, or if you are negotiating a new lease for the same premises, engage your lawyer before the option deadline. This is an opportunity to renegotiate terms that did not work well during the initial term and to ensure the option is exercised correctly.
Missing the option exercise deadline is one of the most common and costly mistakes tenants make. The deadline is strict, and courts and tribunals have consistently held that a late exercise is invalid, regardless of the reason. Your lawyer will ensure the option is exercised in the correct form, within the correct timeframe, and served on the correct party.
When a Dispute Arises
If a dispute arises during the lease, whether it relates to rent reviews, outgoings, repairs, make-good, or the landlord’s failure to meet their obligations, early legal advice can prevent the problem from escalating. Many lease disputes can be resolved through negotiation or mediation without the need for tribunal or court proceedings.
How Much Does a Lease Review Cost?
Legal fees for a commercial lease review vary depending on the complexity of the lease and the extent of negotiation required. As a general guide:
Service Typical Fee Range Lease review only (review and written advice, no negotiation) $1,500 to $3,000 Lease review and negotiation (review, advice, and negotiation of amendments) $3,000 to $7,000 Complex lease or major negotiation (multiple rounds, significant amendments) $7,000 to $15,000+ Heads of agreement review $500 to $1,500 Option exercise $500 to $1,500
Compare these figures to the potential cost of a bad clause. A ratchet clause that keeps your rent above market for three years could cost $30,000 or more. An uncapped make-good obligation could cost $100,000. A personal guarantee that survives assignment could expose you to the entire remaining lease liability even after you have left the premises.
The legal fee is an investment, not a cost.
Your Lease Review Checklist: Questions to Work Through
Before you sign any commercial lease, make sure these questions have been answered:
- What is the total rent over the full lease term, including escalations?
- How is rent reviewed, and can it go down at a market review?
- What outgoings are you responsible for, and are they capped?
- What are your make-good obligations, and what will they cost?
- Is there a personal guarantee, and what is its scope and duration?
- Can you assign the lease or sublet if your circumstances change?
- What is the exact deadline and process for exercising your option to renew?
- Does the lease include a demolition or relocation clause?
- What insurance are you required to hold, and who pays for it?
- What happens if you need to exit the lease early?
- Is the permitted use clause broad enough to accommodate changes in your business?
- Have you engaged a lawyer to review the lease before signing?
Common Mistakes Tenants Make
- Treating the lease as a formality. The verbal agreement with the agent or landlord is the starting point, not the finish line. The lease document is where the binding obligations live, and those obligations frequently differ from what was discussed verbally. Never assume the lease simply puts the handshake into writing. Read it properly, or have someone read it for you.
- Signing the heads of agreement without legal advice. A heads of agreement can be binding on key commercial terms. Once you have signed it, your negotiating position on those terms is significantly weakened. Get advice before you sign anything, including documents that look like they are “just to get things started.”
- Ignoring the option exercise deadline. This is the single most common reason tenants lose their premises. The deadline is typically three to six months before the end of the current term, and it must be exercised in writing in the manner specified in the lease. Missing it by even one day is fatal. There are very limited grounds on which a court or tribunal will grant relief for a late exercise, and none of them are “I forgot.”
- Not budgeting for make-good from day one. Make-good is not a future problem. It is a current liability that accrues from the day you take possession. If you are investing $200,000 in a fitout, you should know from the outset what it will cost to remove it. Factor this into your overall occupancy budget.
- Assuming retail lease protections apply automatically. Not every lease in a shopping centre or retail strip is a retail lease under the relevant state legislation. The classification depends on specific criteria, including the type of business, the floor area, and the nature of the premises. If you assume you are protected by retail tenancy legislation when you are not, you may find that critical protections, such as the prohibition on ratchet clauses, do not apply.
Frequently Asked Questions
Do I need a lawyer for a short-term commercial lease?
Yes. A short-term lease (one to three years) carries many of the same risks as a longer lease, including rent review clauses, make-good obligations, outgoings, and personal guarantees. The dollar amounts may be smaller, but the proportional impact on a small business can be just as significant. The cost of a lease review is modest relative to the total rent commitment, regardless of the lease term.
Can my accountant review the lease instead of a lawyer?
Your accountant can provide valuable advice on the financial aspects of the lease, such as the total occupancy cost, the impact of rent escalations on cash flow, and the tax treatment of lease incentives. However, a commercial lease is a legal document, and the clauses that pose the greatest risk are legal in nature. Your accountant is not qualified to advise on the legal implications of make-good clauses, personal guarantees, default provisions, or dispute resolution mechanisms. You need both.
Do I need a lawyer for a short-term commercial lease?
Yes. A short-term lease (one to three years) carries many of the same risks as a longer lease, including rent review clauses, make-good obligations, outgoings, and personal guarantees. The dollar amounts may be smaller, but the proportional impact on a small business can be just as significant. The cost of a lease review is modest relative to the total rent commitment, regardless of the lease term.
Can my accountant review the lease instead of a lawyer?
Your accountant can provide valuable advice on the financial aspects of the lease, such as the total occupancy cost, the impact of rent escalations on cash flow, and the tax treatment of lease incentives. However, a commercial lease is a legal document, and the clauses that pose the greatest risk are legal in nature. Your accountant is not qualified to advise on the legal implications of make-good clauses, personal guarantees, default provisions, or dispute resolution mechanisms. You need both.
What is the difference between a lease review and lease negotiation?
A lease review involves your lawyer reading the entire lease document and providing you with written advice on the key terms, risks, and problem clauses. Lease negotiation goes a step further. Your lawyer prepares a schedule of proposed amendments and negotiates directly with the landlord’s solicitors to achieve better terms. Most tenants benefit from both review and negotiation, as a review alone identifies the problems but does not resolve them.
Can I negotiate a commercial lease myself without a lawyer?
You can negotiate the commercial terms, such as rent, lease term, and incentives, directly with the landlord or their agent. Many tenants do this effectively. However, the legal terms of the lease require specialist knowledge. Clauses dealing with rent review mechanisms, make-good, default, guarantees, and assignment are drafted in legal language for a reason, and understanding their full implications requires legal training and experience with commercial leasing.
How long does a lease review take?
A straightforward lease review typically takes five to ten business days from the time the lease is received. If negotiation is required, the total process may take two to four weeks, depending on the complexity of the issues and how quickly the landlord’s solicitors respond. Allow for this timeframe when planning your lease signing. If the landlord pressures you to sign within days, that pressure is itself a reason to insist on proper review time.
Final Word
A commercial lease is not a rental agreement. It is a complex legal document that binds your business for years and exposes you to financial risks that most tenants do not fully appreciate until it is too late. The rent figure you agreed on is just one part of the equation. Rent reviews, outgoings, make-good, personal guarantees, and default provisions all contribute to your true cost of occupancy, and they are all negotiable if you have the right advice.
The question is not whether you can afford to engage a lease lawyer. The question is whether you can afford not to. A few thousand dollars in legal fees at the start of a lease can save you tens of thousands, or more, over its term. That is not a guess. It is what we see every time a tenant comes to us after signing a lease they did not fully understand.
