Commercial lease drafting checklist (AU)
A commercial lease is a long-dated commercial contract — many clauses will only be tested years after drafting. This checklist covers the 12 areas that most commonly cause disputes on renewal, exit, or assignment.
This is a 12-step checklist for drafting an Australian commercial lease. It covers the essential commercial terms (term, rent, reviews, outgoings), the operational clauses (assignment, subletting, default), and the drafting overlays required if retail lease legislation applies. Use it as a quality check before issuing an engrossment.
The checklist
Confirm parties, guarantor, and premises definition
Use exact legal names, ABN/ACN, and a plan defining the premises precisely (including common areas, car parks, exclusive use areas).
Draft the term, options, and hold-over
Set out the term, any options to renew, the notice window for exercising, and the hold-over rent position if the tenant remains in occupation.
Draft the rent and rent review mechanism
Specify base rent, GST, and the review mechanism (CPI, fixed percentage, market, or hybrid). Include a ratchet clause position consistent with state retail lease law.
Allocate outgoings
Define recoverable outgoings, estimates and reconciliations, and exclude outgoings prohibited by retail leases legislation where applicable.
Draft permitted use and exclusivity
Define permitted use narrowly to preserve landlord control. Consider any exclusivity covenants and their operation on other leases in the centre.
Insurance and indemnity regime
Specify public liability, plate glass, and contents insurance limits. Confirm indemnity consistent with proportional liability legislation.
Assignment and subletting
Draft the consent framework, any refurbishment/re-fit triggers, and release of outgoing tenant. Retail leases may regulate refusal grounds.
Default and termination
Set out events of default, notice periods, and the interaction with essential term breaches. Ensure compliance with state-based lease forfeiture notice regimes.
Make good and surrender regime
Define the make good standard (strip-out, refit, bare-walls) and any cash-in-lieu mechanism. Resolve fixtures/fittings ownership.
Incentives, fit-out, and bank guarantee
Document incentives (rent-free, cash, fit-out contributions), any claw-back, and security (bank guarantee or cash bond) limits.
Retail leases overlay
Determine whether the lease is a retail lease under the relevant state Act. If so, prepare the disclosure statement and tenant guide and audit for prohibited clauses.
Registration, stamp duty, and GST
Assess whether the lease must be registered, the stamp duty position for the state, and confirm the GST position (input-taxed, going concern, or taxable).
When this checklist applies
Use this checklist when drafting a new commercial lease, reviewing a landlord's precedent, or preparing a first-principles redraft. Walk through each area and confirm the commercial position before sending to the client for sign-off.
Common pitfalls
- Treating a retail lease as a general commercial lease — prohibited clauses invalidate parts of the lease
- Ambiguous make good clauses generating six-figure disputes at exit
- Ratchet rent clauses that are unenforceable under state retail legislation
- Poorly defined permitted use limiting tenant flexibility while not preserving landlord control
- Incomplete disclosure statements delaying or invalidating the lease
Run this checklist on a real matter
Quillio drafts first-cut commercial and retail leases from a term sheet, applies the right state overlay, and flags prohibited clauses before issue. See /practice-areas/property-lawyers or start a free trial.
This checklist covers standard commercial leases. Complex build-to-suit, ground, or turnover-based retail leases may need additional drafting steps.
Use this checklist on your matter.
Quillio can run this checklist on a specific NSW conveyancing matter — confirm each item, calculate adjustments, and generate the supporting documents. The free trial requires no credit card.
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