Commercial leases in NSW: key terms every tenant should negotiate
Leasing commercial premises in New South Wales is often one of the biggest commitments a business will make. The terms of a lease can have long-term financial and operational impacts. That’s why careful negotiation is essential.
Here are the key terms every tenant in NSW should focus on when negotiating a commercial lease.
Rent and rent reviews
The lease should clearly set out how much rent is payable and how it will increase. Common rent review methods include:
- Fixed percentage increases (e.g. 3% per year).
- Consumer Price Index (CPI) adjustments.
- Market rent reviews.
Understanding the mechanism helps you forecast future costs.
Lease term and options to renew
A lease should strike the right balance between security and flexibility. Tenants should consider:
- The initial lease term (often three to five years).
- Options to renew, giving the tenant the right to extend the lease.
- Conditions for exercising the option, such as providing written notice on time.
Outgoings and hidden costs
Tenants are often responsible for outgoings such as rates, utilities, and insurance. The lease should list all outgoings payable and how they are calculated. Watch out for ambiguous terms that allow landlords to pass on unexpected expenses.
Fit-out and alterations
If you need to fit out the premises, the lease should clarify who pays, who owns the improvements, and whether you must restore the premises at the end of the lease.
Assignment and subletting
Your business needs may change. Negotiating the right to assign or sublet can give you flexibility to move without being locked in.
Repair and maintenance obligations
Leases often require tenants to keep the premises in good repair. It’s important to clarify:
- What constitutes “fair wear and tear.”
- Whether you must return the premises to its original condition.
- Who is responsible for structural repairs.
Security and guarantees
Landlords may require a bank guarantee or personal guarantee. Tenants should ensure the guarantee is capped at a reasonable amount and limited to the lease obligations.
Final thoughts
Negotiating a commercial lease in NSW is about more than just rent — it’s about managing risk and ensuring your business can thrive in the chosen premises. Legal advice can help uncover hidden costs and secure better terms.
Call 1800 000 566 to discuss your current or next commercial lease. You can also book a free consultation using our online calendar, or fill in the form below.