Entering into a commercial lease in NSW is one of the most significant commitments a business owner can make. Whether you are opening a café on the Northern Beaches, setting up offices in Parramatta, or expanding into Wollongong, the terms of your lease will impact your business’s success and financial stability. Unfortunately, many tenants sign a lease without fully understanding their obligations — leading to costly disputes later.
At MCB Lawyers, we regularly advise business owners on commercial leasing matters and help them avoid common pitfalls. Below, we outline the key issues every tenant should be aware of before signing a lease.
🔑 Key Takeaways
- Understand rent, outgoings, and make-good clauses before signing a commercial lease.
- Check renewal options and termination rights to protect your business location.
- Always seek advice from a commercial lease lawyer in NSW to avoid costly disputes.
1. Rent Reviews and Increases
One of the most common commercial lease disputes arises from rent reviews. Leases often include clauses allowing the landlord to increase rent annually — sometimes linked to the Consumer Price Index (CPI), a fixed percentage, or market review.
Pitfall: Tenants are caught off guard by steep rent hikes that significantly impact cash flow.
Tip: Always review the rent review mechanism and seek advice on its long-term implications. A lawyer can negotiate terms that provide more certainty and fairness.
2. Outgoings and Hidden Costs
Commercial tenants are often required to contribute to outgoings such as council rates, water, insurance, and strata levies.
Pitfall: Some leases pass on unexpected or excessive costs to tenants, including capital works that should be the landlord’s responsibility.
Tip: Ensure the lease clearly defines which outgoings you must pay. Compare the total lease costs, not just the base rent.
(See NSW Fair Trading’s guide on retail and commercial leases for further information.)
3. Repairs, Maintenance, and Make-Good Obligations
Tenants are usually responsible for day-to-day maintenance of the premises. However, issues often arise around structural repairs and end-of-lease obligations.
Pitfall: At the end of the lease, tenants may be required to “make good” the premises, which can mean expensive refurbishments or restoration works.
Tip: Negotiate make-good clauses upfront to limit your exposure. Always clarify responsibility for structural repairs and major works.
4. Lease Termination and Renewal Options
Termination and renewal clauses are critical. Without a clear option to renew, you could lose your business location after investing heavily in fit-out and goodwill.
Pitfall: Business owners assume renewal will be automatic, only to find they have no right to continue occupying the premises.
Tip: Ensure any option to renew is clearly written into the lease, with specific notice periods. Seek legal advice before exercising your option to avoid procedural mistakes.
5. Personal Guarantees and Security Deposits
Landlords often require personal guarantees from directors of a company tenant, as well as security deposits or bank guarantees.
Pitfall: Personal guarantees expose directors to personal liability for lease obligations — even if the company fails.
Tip: Consider negotiating limits on guarantees, or alternatives such as higher security bonds.
Why Legal Advice Matters
Commercial leases are legally binding documents that often favour the landlord. Having an experienced commercial lease lawyer in NSW review your lease can:
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Identify unfair or risky clauses;
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Negotiate terms that protect your interests;
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Provide certainty around costs and obligations; and
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Reduce the risk of future disputes.
At MCB Lawyers, we assist tenants and landlords across Manly, Parramatta, and Wollongong with drafting, reviewing, and negotiating commercial leases.
Final Thoughts
Before you sign a commercial lease, take the time to understand your obligations. Avoiding the common pitfalls around rent, outgoings, repairs, renewals, and guarantees can save your business thousands of dollars and safeguard your future.
📞 Need advice on a commercial lease? Contact MCB Lawyers today to ensure your lease terms work in your favour.
Disclaimer: This blog post is for general information only and does not constitute legal advice. Please seek tailored legal advice before acting on any of the information provided.