Term and options
Check the initial term, option periods, the process and deadline for exercising an option, and whether any conditions can prevent an option being exercised.
Rent and reviews
Understand how and when rent changes: fixed increases, CPI, market review or a combination. Consider the effect over the full intended occupation period.
Outgoings
The lease should be clear about which operating costs, statutory charges and building expenses the tenant is expected to contribute to.
Permitted use and approvals
The permitted use should be broad enough for the intended business. The lease should also be considered alongside planning, licensing or other approvals required to operate.
Fit-out, repairs and make-good
Clarify who pays for works, who owns the fit-out, maintenance obligations and what must be removed or reinstated when the lease ends.
Guarantees and security
Personal guarantees, bank guarantees and security deposits can materially increase the financial exposure of the business owners.
Assignment and sale of the business
If you may sell the business, understand the landlord's consent process and what conditions apply to assignment or transfer of the lease.
Heads of agreement can create negotiating constraints
Tenants often seek legal review only after signing an offer or heads of agreement. Even if stated to be non-binding, the document can create strong commercial expectations about term, rent, incentives, guarantees and make-good. Obtain advice before signing if the terms are material or the document contains binding provisions such as confidentiality, exclusivity or costs.
Retail lease status
Whether the Retail Leases Act 1994 (NSW) applies can affect disclosure, outgoings, assignment and other rights. The classification should be checked against the premises and business use rather than assumed from the landlord’s template.
Disclosure statement
For a NSW retail shop lease, the lessor’s disclosure statement is generally required at least seven days before the lease is entered into. Compare the disclosure statement with the lease: discrepancies about outgoings, works, incentives or representations should be resolved before execution.
Repair versus capital replacement
A tenant may reasonably expect to maintain equipment it uses, but a broadly drafted repairs clause can shift major replacement costs for air-conditioning, plant or building services. Identify which party bears ordinary maintenance, breakdown and capital replacement.
Relocation and demolition
Shopping-centre and redevelopment leases may contain relocation or demolition rights. Understand the notice, compensation, fit-out and termination consequences before investing heavily in premises that may not remain available for the full term.
Default and termination
Review events of default, cure periods, interest, landlord re-entry rights and costs. Cross-defaults to related documents or broad insolvency provisions can matter in a distressed business even before rent becomes seriously overdue.
Assignment and change of control
If the tenant is a company, the lease may regulate not only assignment of the lease but changes in ownership of the tenant company. That can become critical when the business is later sold by share sale rather than asset sale.
Option dates need a diary system
An option is only valuable if exercised validly and on time. Record the earliest and latest exercise dates immediately after signing and monitor conditions that could prevent exercise, such as unresolved default.
Before signing, ask for a one-page commercial summary
A useful legal review should leave the tenant able to answer: total occupancy cost, security exposure, length of commitment, exit rights, assignment process, option dates and end-of-term make-good. Those are the provisions most likely to affect the business financially.