How Can A Lawyer Help Me Negotiate Favourable Terms With A Commercial Landlord?

Most commercial leases are drafted by the landlord’s solicitor, on the landlord’s terms, with the landlord’s risk allocation. The tenant signs into a contract built around someone else’s interests and only discovers the costs during the term when the leverage to renegotiate is gone..

The financial exposure created at signing routinely runs into six figures. Outgoings escalation, make good obligations, personal guarantees and rent review mechanics are the four provisions that usually decide the real economic outcome of a lease, and all four are negotiable before signing and almost none after.

A commercial lease lawyer’s job is narrow and quantifiable – identify how risk is allocated in the landlord’s draft, price the long-term consequence of each clause, and negotiate the document into balance before it is signed.

This article references NSW legislation and circumstances specifically. Legislation in other states is often similar, but not the same. Please ensure you refer to the specific legislation that applies to your state.

The Risks of Signing a Commercial Lease Without Review?

A tenant who signs without legal review carries forward whatever terms the landlord’s solicitor has drafted. Four risks recur in the NSW commercial lease we review:

• Loss of retail lease protections: A tenant who signs without checking whether the Retail Leases Act 1994 (NSW) applies may lose mandatory disclosure rights, restrictions on certain outgoings, statutory limits on ratchet clauses, and the obligation on landlords to return bank guarantees within prescribed time limits.
• Unexpected outgoings: A tenant who accepts broad indemnification clauses without review may face substantially higher occupancy costs during the lease term. Without a contractual right to review invoices and calculations, the tenant has to pay whatever amounts are claimed. In practice, the difference between a well-drafted outgoings clause and a poor one is rarely visible at signing – it surfaces years later as an audit-rights argument the tenant cannot win.
• Make good disputes: A tenant who agrees to a make good clause without a commencement condition report leaves the exit standard open to the landlord’s interpretation. Make good disputes involving NSW tenants frequently result in substantial claims at the end of a tenancy that could have been narrowed by negotiation before execution. Make good is the single most under-negotiated clause in Sydney commercial leases. Most tenants discover this in the final 90 days of the term, when they have no leverage to renegotiate it.
• Personal liability: A director who signs an unlimited personal guarantee exposes personal assets to claims for unpaid rent, outgoings, incentives, and reletting losses if the business fails. The guarantee can survive the insolvency of the tenant company and pursue the director directly.

Does the Retail Leases Act 1994 (NSW) Apply to Your Lease?

Before negotiation on any specific term begins, a lawyer first determines whether the Retail Leases Act 1994 (NSW) applies. The Act overrides inconsistent lease terms and gives tenants protections that a standard commercial lease does not, so this question has to be settled before negotiation begins.

The Act applies to premises used wholly or predominantly for one of the businesses listed in Schedule 1 of the Retail Leases Regulation 2022 (NSW), or premises within a retail shopping centre. Premises with a lettable area of 1,000 square metres or more are excluded. So are leases under 6 months without an option to renew, leases of 25 years or more (including options), and leases to certain listed-public-company and government-related tenants

Where the Act applies, key tenant rights cannot be contracted out of, and the analysis of every other lease term changes. The retail or commercial classification decides every question that follows.

The Lease Terms That Actually Decide the Outcome

A commercial lease is a long document. Most of the wording is standard, but a small number of clauses decide what the tenant actually pays and how the lease works in practice.

• Rent and annual rent reviews: A lawyer negotiates how rent will increase over the term, whether through fixed annual rises, CPI linked reviews, market reviews, or a combination. Rent-free periods, flexible payment terms, and caps on future increases are all open to negotiation. Comparing the actual long-term cost of competing offers is more useful than relying on the advertised headline rent. In our experience, the rent review mechanic is the single clause most tenants accept without modification – and the single clause that most reliably causes regret later in the term.
• Lease term and renewal options: The term of the lease affects both business stability and future flexibility. A lawyer negotiates renewal rights, notice periods, and how rent will be reviewed if the tenant elects to renew. Without properly drafted renewal clauses, tenants can face sharp rent increases or lose the premises when the initial term ends.
• Outgoings and recovery limits: Outgoings are the additional property costs the tenant pays alongside rent, and tenants often miss how much they add up to. A lawyer negotiates a clear list of recoverable outgoings, caps on annual increases, and rights to audit the landlord’s calculations.

For retail leases, the statutory definition of “outgoings” in section 3A of the Act, combined with the disclosure regime in section 12A, restricts what the landlord can recover – depreciation costs, capital costs, the landlord’s borrowing or interest costs, and contributions to capital are not recoverable from a retail tenant. Land tax is recoverable only on a single-holding basis under section 26 of the Act. None of these protections apply to a standard commercial lease and need to be negotiated in.

• Tenant improvements and fitout costs: A lawyer negotiates who pays for renovations, fitout works, and tenant improvements during the term. Landlord obligations to complete agreed works before the tenant takes possession are reviewed, along with approval rights over contractors and designs.
• Make good obligations: Make good obligations are one of the most significant hidden costs in Sydney commercial leases. A lawyer attaches a condition report supported by dated photographs and defines the standard the premises must be returned in at the end of the term.

Fitout removal obligations, fair wear and tear exceptions, and limits on landlord claims for additional rectification are all open to negotiation.

• Use clauses and exclusivity rights: The use clause controls how the tenant can operate the business from the premises. A lawyer negotiates broader wording so the business has flexibility to grow or expand its services over time. For tenants in a retail shopping centre, exclusivity clauses can prevent the landlord from leasing nearby premises to direct competitors.
• Personal guarantees and bank guarantees: The financial exposure of a personal guarantee can be severe. The NSW Court of Appeal decision in Lin v Solomon [2017] NSWCA 328 puts the exposure in concrete terms – a director who had personally guaranteed a 5-year retail lease over a newsagency in the CircaRetail Shopping Centre at Bella Vista was held liable to the landlord for $602,178.35 after the tenant company defaulted, and the Court of Appeal enforced the guarantee on its written terms.

The director argued the leasing agent had misled him about foot traffic from a nearby development. The NSW Court of Appeal held the defence failed on two grounds and found the alleged representations had not been made in the way the director claimed, and that he was an experienced newsagent operating a store 5 minutes away who would not have relied on them in any event.

The Court held that a personal guarantee is enforced on its written terms, and informal pre-signing statements by a leasing agent do not unwind it. The lesson for tenant directors or operators signing personal guarantees is narrow but critical: the guarantee is enforced on its written terms, and what the landlord or the agent represented to you will not save you.

A lawyer negotiates limits on personal liability, reductions in the guarantee amount after a period of consistent payment, and clear terms for returning the bank guarantee.

Under , a retail landlord must return the original bank guarantee within 2 months of the tenant completing the obligations the guarantee secured – the clock runs from completion of those obligations and not from vacation of the premises. Commercial leases do not carry that protection by default.

• Assignment and subletting rights: Assignment and subletting matter where the tenant wishes to sell the business or sublet part of the premises. A lawyer negotiates the circumstances in which the landlord can refuse consent and the timeframe within which the landlord must respond.

For retail leases, the Act limits the grounds on which a landlord can refuse assignment and provides protections against ongoing liability after the assignment takes effect. The position under a standard commercial lease is governed entirely by the contract.

• Maintenance, repairs, and signage rights: Most commercial leases split responsibility for repairs, maintenance, air conditioning, and building services between landlord and tenant. A lawyer negotiates clear allocations to avoid disputes during the term. Signage rights, including external signs, illuminated signage, and the landlord’s approval thresholds, are central to business visibility.
• Default and early termination rights: A lawyer reviews default clauses, grace periods, and termination rights to protect the tenant against breaches, insolvency events, and unforeseen disruption. Early termination rights, repair-and-deduct provisions, and clear cure periods allowing the tenant to remedy breaches before the landlord can terminate are open to negotiation at signing.

Where to From Here

At PCL Lawyers, we advise on commercial and retail lease negotiations across NSW for both landlords and tenants. We review Heads of Agreement or Lease Proposals, Agreements for Lease, disclosure statements, and formal lease documents, and we handle negotiations, lease renewals, assignments, surrenders, and disputes.

Most lease disputes trace back to how the original negotiations were handled. We identify the hidden risks in landlord drafts, quantify the long-term cost of competing offers, and structure terms that protect the business as the lease runs.

If you are reviewing a Heads of Agreement or Lease Proposals, or have received a draft lease, the cost of a pre-signing review is a fraction of the exposure it removes. We act for both tenants and landlords across NSW and take a limited number of new lease matters each month.

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.