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Below are the basic aspects of a commercial lease agreement for Queensland property. These are the terms landlords and tenants should consider before a lease is signed or offered. For each one, we explain what it means, the Queensland position and what commonly goes wrong.
Most leases begin with a letter of offer or heads of agreement. It records the rent, term, options, incentives and any landlord works. It is often treated as a formality however these form binding agreements and the lease terms aredrafted from it. Points missed at this stage are hard to add later, so review the offer before you sign it.
Where a lease is a retail shop lease, the Retail Shop Leases Act 1994 (Qld) overrides some terms. The landlord must give a disclosure statement at least seven days before the lease is signed. The tenant must generally obtain legal and financial advice reports before entering the lease and provide a Lessee Disclosure Statement. We note below where the Act changes the position.
The lease should state the commencement date, the length of the term and any option periods. In Queensland, a lease longer than three years should be registered with Titles Queensland. Registration protects the tenant if the property is later sold or mortgaged.
Where it goes wrong: The commencement date is tied to an event, such as completion of fitout, that nobody records. Neither party can then say with certainty when the term, or the option deadline, ends.
The lease should state whether rent and outgoings are inclusive or exclusive of GST. Most commercial landlords are registered for GST and charge it on rent.
Where it goes wrong: The rent is stated with no reference to GST. The landlord argues GST is payable on top, and the tenant argues it is included. Across a lease of several years, that is ten percent of every payment.
Where the tenant is a company, landlords usually ask the directors to guarantee its obligations personally. A guarantor becomes liable for rent and damages if the company cannot pay. For retail shop leases, a properly completed assignment can release the outgoing tenant and its guarantors.
Where it goes wrong: A director signs a guarantee that continues through every option and assignment. Years after selling the business, they receive a demand for the new owner’s arrears.
Most leases require the landlord’s consent before any sign is installed. Council approval may also be needed, depending on the size and type of sign.
Where it goes wrong: A tenant opens for business and only then learns its main sign is not permitted. For a retail or hospitality business, poor signage can affect trade from the first day. Agree the location, size and approval process before signing.
The lease should state the starting rent and one clear method for each review. That could be a fixed increase, CPI or a market review. For retail shop leases, the Act voids ratchet clauses that stop rent falling on a market review. It also prevents a review based on whichever of two methods gives the higher rent.
Where it goes wrong: A market review clause sets no process for appointing a valuer. A disagreement about rent then becomes a dispute about procedure as well.
Outgoings are the running costs of the property, such as rates, insurance, cleaning and common area maintenance. The lease should list which outgoings the tenant pays and in what proportion. For retail shop leases, the Act limits what can be recovered, and land tax can never be passed on.
Where it goes wrong: The lease refers to “all outgoings” without a list or an estimate. The tenant cannot budget, and every annual reconciliation becomes a potential dispute.
Some leases require the tenant to refurbish the premises during the term or before handing them back. The clause should describe the standard required and when the obligation applies.
Where it goes wrong: The clause requires the premises to be refurbished “to the landlord’s satisfaction”. At the end of the lease, the tenant faces a full refit it never priced into the deal. Make good obligations raise the same issue and need the same precision.
The lease must describe the premises accurately, including any car parks, storage or shared areas. If the lease is to be registered, it needs the correct legal description and often a survey plan.
Where it goes wrong: The lease describes “Shop 3” without a plan, and the parties later disagree about an outdoor seating area. Registration can also be delayed when the description does not match the title.
Landlords usually require a bank guarantee or cash bond, often equal to a set number of months’ rent. The lease should state the amount, when it can be drawn on and when it must be returned.
Where it goes wrong: A bank guarantee expires partway through the term, or names the wrong entity. On assignment, the outgoing tenant’s security is released before the incoming tenant’s security is in place.
A relocation clause allows the landlord to move the tenant to other premises within the centre or building. For retail shop leases, the Act requires notice and may require the landlord to pay compensation and reasonable costs.
Where it goes wrong: A tenant spends heavily on fitout, then receives a relocation notice for a less visible tenancy. Without clear limits in the lease, the tenant has little room to negotiate.
The lease should state who pays for electricity, water, gas and telecommunications, and how each is measured. Separate meters for each tenancy are the clearest arrangement.
Where it goes wrong: Services are shared across several tenancies with no separate meter. Costs are then split by a formula nobody agreed, or by the landlord’s estimate.
Tenants are commonly required to hold public liability insurance and to insure their own fitout and stock. The landlord insures the building. The lease should state the minimum cover required and when evidence must be provided.
Where it goes wrong: The tenant’s policy lapses unnoticed, or the cover sits below the lease minimum. After an incident, both parties discover the gap at the worst possible time.
The lease may allow the tenant to assign or sublet, with or without the landlord’s consent. Generally, the lease should provide that consent must not be unreasonably withheld. If the new tenant can meet the lease and the existing tenant is not in default, consent should follow. For retail shop leases, the Act sets out the assignment process.
Where it goes wrong: The lease requires consent but sets no timeframe for the landlord to respond. A business sale stalls, and the buyer’s finance and settlement dates pass while the parties wait.
Generally, repairs and maintenance are the tenant’s responsibility, while structural work is the landlord’s. Disputes arise when the parties disagree about a defect and the lease does not set out who is responsible.
Where it goes wrong: A roof leak damages the tenant’s stock. The landlord blames blocked gutters, which the tenant must maintain, and the tenant says the roof has failed. A lease that lists each party’s obligations avoids the argument.
The lease will state the permitted use. It is for the tenant to ensure that use complies with council requirements. Where there is any doubt, investigate before signing. In a centre with multiple tenancies, a tenant may want an exclusive right to its use within the centre.
Where it goes wrong: A tenant signs a lease for a café in premises with no approval for food service. The tenant must keep paying rent while it seeks an approval it may never obtain.
Default by the tenant has two potential outcomes. A serious default, such as unpaid rent or an unauthorised use, can entitle the landlord to take back possession. The landlord can then relet the premises and recover its loss. A minor default usually entitles the landlord to damages only. Before taking back possession, the Property Law Act 2023 (Qld) generally requires a notice to remedy breach.
Where it goes wrong: A landlord changes the locks without serving a valid notice. The tenant may then seek relief against forfeiture and compensation for the lockout.
Car parking arrangements should be stated clearly in the lease, so it reflects what the parties agreed. Parking for staff and customers can be critical for some businesses. The lease should state the number of spaces, whether they are allocated and any separate charge.
Where it goes wrong: Parking was promised during negotiations but never written into the lease. When the landlord later allocates those spaces to another tenant, the original tenant has no right to them.
Any option to renew for a further term must be set out in the lease. Options give a tenant security of tenure, which matters most when selling the business. The lease should state how and when the option is exercised, and how the new rent is set. For retail shop leases, the landlord must notify the tenant of the option deadline.
Where it goes wrong: A tenant misses the option deadline by a few days. Outside the retail leasing rules, the landlord is generally not obliged to renew. The goodwill in the business can be lost with it.
Our experienced commercial lawyers can assist landlords and tenants with lease preparation, review, negotiations, renewals, assignments, and dispute prevention. Contact A.L.F. Lawyers today for practical legal guidance tailored to your commercial lease matter.
Every lease is different, and these points are a starting checklist rather than a complete review. Our commercial lease lawyers prepare and review leases for landlords and tenants on a fixed fee basis. For the full service, including retail lease disclosure, see our Commercial Leases page. If a lease has already gone wrong, see our lease disputes page.
