Commercial Lease Review Checklist

Article Summary

This Commercial Lease Review Checklist explains what Queensland tenants should check before signing: retail lease parotection, total rent and outgoings, permitted use and approvals, repairs, make good, guarantees, renewal deadlines, assignment, exit rights and default consequences. It also examines incentives, security, relocation and potentially unfair terms.

Tenants should obtain the supporting documents, calculate the full financial commitment, record the premises’ condition and negotiate specific amendments before committing. Renewal deadlines require careful attention, assignment does not necessarily release existing liabilities, and termination exposure can extend beyond unpaid rent. Two High Court decisions and practical examples explain why the complete agreement—and its interaction with current Queensland legislation—matters.

A Commercial Lease Review Checklist should test the total cost of occupation, the right to use the premises, repair and make good obligations, personal guarantees, renewal options, exit rights and default consequences. In Queensland, it must also establish whether retail leasing legislation applies and whether the lease reflects the current property law framework. The review should produce specific amendments and decisions before the tenant commits.

A lease can make commercial sense at the advertised rent and still be a poor agreement. An expensive air-conditioning replacement, an unusable permitted-use clause or a guarantee that survives a business sale can change the economics completely. Those are the issues worth finding before the fit-out starts.

This Commercial Lease Review Checklist is written principally for prospective Queensland tenants and their directors. Landlords can also use it to identify drafting that invites disputes. It complements our broader guide to commercial lease review in Queensland, with the emphasis here on what to check, what evidence to obtain and what to change.

Commercial Lease Review Checklist at a glance

The first pass should identify matters that could prevent the business operating or expose the tenant to liabilities it cannot sensibly price. A Commercial Lease Review Checklist is useful only if someone follows up the missing answers.

Start the Commercial Lease Review Checklist before signing heads of agreement

Do not assume that the document called the “lease” is the first document that matters. Send the solicitor the offer, heads of agreement, agent’s emails, draft lease, disclosure statement, incentive deed, fit-out licence, guarantee and any rules incorporated by reference.

Ask expressly whether the preliminary documents are intended to bind anyone, whether a deposit is refundable and whether legal review is a condition of proceeding. If the tenant wants no binding lease commitment until satisfactory legal review, that intention needs clear drafting. A heading or an agent’s reassurance is a poor substitute.

The Commercial Lease Review Checklist should also reconcile the documents. A six-month rent concession in an email is of little practical comfort if the executed incentive deed makes it repayable on a broadly defined default. Check which document prevails if the provisions conflict, and whether the incentive is available to an assignee or during an option term.

Case example one — why the whole agreement matters

In Mount Bruce Mining Pty Ltd v Wright Prospecting Pty Ltd [2015] HCA 37, a dispute about mining royalties turned on the construction of a commercial agreement. The High Court explained at [46]–[51] that contractual meaning is determined objectively from the text, context and purpose, asking what a reasonable businessperson would understand.

This was not a leasing case. Its relevance is the method of reading a commercial contract. A review cannot safely stop at the lease schedule while leaving a definition, annexure or incorporated deed unread. Nor should a tenant assume that its private understanding of an arrangement will control the written bargain. The practical response is to make the intended allocation of risk explicit across the documents.

Which Queensland laws apply to the Commercial Lease Review Checklist

The label “commercial lease” does not decide whether a tenancy receives retail lease protection. Classification requires the premises, business and statutory exclusions to be examined under the Retail Shop Leases Act 1994 (Qld), ss 5A–5D. A shop exceeding 1,000 square metres is excluded by s 5A(2)(a).

For a new retail lease, s 21B(1) generally requires the draft lease and disclosure statement at least seven days before entry. The disclosure-statement waiver mechanism is in s 21B(2). Do not treat a waiver as routine administration. Disclosure defects may support termination within six months, subject to the conditions and qualifications in s 21F.

Our explanation of retail lease protection in Queensland develops those protections and their limits. Retail status is worth resolving at the outset, rather than arguing about it after a demand arrives.

The Property Law Act 2023 (Qld) commenced on 1 August 2025. Under s 139, Schedule 1 standard terms are implied subject to contrary agreement and legislation. For an older lease, check the transaction history and applicable transitional provisions before assuming every current rule applies identically.

Rent and outgoings in the Commercial Lease Review Checklist

Ask for a schedule of the money payable at entry, each year and on exit. Include GST where applicable, security, fit-out costs, insurance obligations, outgoings, review assumptions and the cost of replacing major equipment. A monthly rent figure is not a budget.

For example, annual base rent of $80,000 with a fixed 4% annual increase becomes approximately $93,589 in year five. The five-year base rent totals approximately $433,306, before GST, outgoings and incentives. Those are arithmetic assumptions, not a prediction of market rent. Model any market review separately.

The Commercial Lease Review Checklist should distinguish a genuine rent-free period from a payment deferred until later. Check when outgoings start, whether a concession reduces the rent used for future increases and whether repayment is proportionate to the remaining term. Request worked examples if the clawback formula is difficult to follow.

For retail leases, s 27 regulates review timing and bases; s 36 addresses prohibited review provisions, with major-lessee qualifications. Section 37(1) requires specified outgoings and recovery arrangements. Section 7(3) excludes land tax and capital expenditure from outgoings.

Outside that protection, negotiate the exclusions rather than assuming them. Ask for recent actual expenditure as well as a budget. Query management fees, vacancy allocations, compliance upgrades and any description broad enough to transfer ownership costs to the tenant.

Check that the premises can support the proposed business

A permitted-use clause records the landlord’s contractual permission. It does not itself establish planning approval, an adequate electrical supply or permission to alter common property.

The Commercial Lease Review Checklist should identify which approvals need confirmation by the solicitor and which require a planner, certifier, engineer or other specialist. Define who obtains them, who pays and what happens if an essential approval is refused or delayed. Consider an appropriate approval condition and long-stop date before committing to unconditional rent.

Inspect the lease plan against the actual premises. Storage, car spaces, loading access, signage and outdoor seating should not depend on an informal arrangement that can disappear. Check trading hours and access outside normal building hours, including air-conditioning charges.

Practical example — a café with no workable exhaust route

A proposed café tenant receives permission to use the premises as a café and assumes cooking will be possible. The lease nevertheless requires separate consent for roof penetrations, and there is no agreed exhaust route through common property.

The tenant needs more than a broader permitted-use clause. The sensible pre-signing response is to settle the design, necessary consents, costs and installation rights, with a workable exit if the essential approvals cannot be obtained. This hypothetical shows why a Commercial Lease Review Checklist must connect the legal documents with the physical building.

Repairs and make good deserve a separate Commercial Lease Review Checklist

Read the repair covenant and the end-of-lease obligations separately. “Maintain”, “repair”, “replace”, “reinstate” and “remove” can ask different things of a tenant. An exception for fair wear and tear in one clause may not qualify a replacement obligation elsewhere.

Obtain a dated photographic condition report, identify existing defects and list the landlord’s plant. Ask who replaces an ageing air-conditioning unit when it reaches the end of its useful life. If the tenant accepts servicing responsibility, that need not mean it should also accept the cost of replacing the entire system regardless of cause.

The Commercial Lease Review Checklist should not simply ask whether there is a make good clause. It should price the obligation and establish the evidence by which compliance will be judged.

Section 178(2)–(3) of the Property Law Act 2023 limits repair damages to the lesser of diminution in the reversion’s value and actual repair cost, with a further demolition or structural-alteration qualification. Do not assume every removal or reinstatement promise is a repair obligation. Our analysis of make good clauses in Queensland leases explains that distinction.

Practical example — inheriting another tenant’s fit-out

A tenant takes a three-year lease of offices containing glass partitions installed by the previous occupier. The draft requires the premises to be returned as an open shell. Unless the obligation is changed, keeping the existing fit-out may bring an expensive removal exercise at the end.

Record which installations may stay, who owns them and what must be removed. A verbal statement that the landlord “usually keeps the partitions” leaves the commercial risk unresolved. Photographs establish what exists; they do not, by themselves, change the removal covenant.

Personal guarantees and security

Read every signature block. Identify whether the director signs only for the company or also gives a personal guarantee or indemnity. The company’s limited liability does not answer the separate question of what its director has promised.

The Commercial Lease Review Checklist should record the proposed limit, duration, release events and treatment of variations, renewals and assignments. Check whether a purported dollar cap includes interest, enforcement costs and make good. An indemnity may create additional obligations beyond the guarantee and requires its own analysis.

Negotiate security as a package. A bank guarantee, cash deposit and unlimited personal undertaking may leave the tenant funding overlapping protections. Specify when security may be called, what notice is required, how a disputed call is handled and when the unused security must be returned. Read the bank guarantee itself alongside the lease.

Our article on personal guarantees in commercial leases and risks for directors examines continuing liability. Do not assume that resignation or a business sale is a release. Obtain a documented release where that is the agreed outcome.

Renewal options and a workable exit

A Commercial Lease Review Checklist should capture the last day for exercising each option, any earliest exercise date, the required recipient and the method of delivery. Put reminders comfortably before the contractual deadline and retain proof of service.

Also read the conditions. Is the option conditional on there being no breach? What rent applies on renewal? Can a buyer exercise the option after assignment? An apparently generous option can be commercially weak if its conditions leave the tenant uncertain when it needs to negotiate a business sale.

Section 164(4) of the Property Law Act 2023 excludes the notice period from its definition of a “formal requirement”. Do not assume its relief framework excuses a missed option deadline.

For assignment and other consent requests, s 142(3), (5) and (8) addresses unreasonable refusal, a one-month decision period after full particulars, and court recourse. Silence is not automatic consent.

The Commercial Lease Review Checklist should therefore identify the information needed for a sale or assignment well before a purchaser is found. Negotiate a practical process, but distinguish obtaining consent from obtaining a release of the outgoing tenant and guarantors. Our guide to exiting a commercial lease early in Queensland explains the available routes. Budget on continuing liability unless an effective release, termination right or other legal basis changes that position.

Default clauses and the cost of getting termination wrong

Default drafting needs to be read with the damages provisions. Identify essential terms, cross-defaults, cure periods, interest, incentive repayment, indemnities and costs. Ask whether a minor administrative failure triggers consequences disproportionate to its commercial significance.

Case example two — rent arrears can lead to loss of bargain damages

In Gumland Property Holdings Pty Ltd v Duffy Bros Fruit Market (Campbelltown) Pty Ltd [2008] HCA 10, the High Court examined a lease and a later deed concerning rent arrangements. Reading the provisions together, it held that the rent obligation was essential and that termination could support loss of bargain damages. Paragraphs [42]–[58] explain the significance of that drafting.

The lesson is not that every late payment makes the tenant liable for every future rental instalment. The contractual terms, lawful basis for termination and assessment of loss matter. But the financial exposure may extend well beyond arrears. A Commercial Lease Review Checklist should draw that possibility to the tenant’s attention before the default occurs, not leave it buried in a general explanation of the rent clause.

Under s 153 of the Property Law Act 2023, re-entry for breach generally requires an approved notice and reasonable opportunity to remedy. Section 156 provides an exception where the landlord reasonably believes possession has been given up.

Check the notices clause against mandatory requirements. Neither side should use a generic contractual default period as a substitute for analysing the statutory process. Our guide to commercial lease lockouts for unpaid rent in Queensland addresses the consequences when possession is at stake.

Disruption and potentially unfair terms

A five-year term may offer less security than expected if a relocation or demolition clause can interrupt it. Ask how much notice the business needs, who pays for the move and fit-out, whether substitute premises are suitable and whether the tenant has an exit. Check rent abatement and termination provisions for damage or prolonged loss of access.

For retail relocation clauses, the statutory framework begins with ss 46C–46D of the Retail Shop Leases Act 1994. Do not assess the commercial impact from the lease clause alone.

The Commercial Lease Review Checklist should also flag potentially unfair terms. For current transactions, the Australian Consumer Law (Schedule 2 to the Competition and Consumer Act 2010 (Cth)), s 23(4) covers qualifying small business contracts, including grants of interests in land, where a party satisfies the fewer-than-100-employees or less-than-$10-million-turnover test. Standard form status and applicable commencement rules must also be checked.

Under s 24, unfairness involves significant imbalance, lack of reasonable necessity to protect legitimate interests, and detriment. Transparency and the contract as a whole matter. Section 27(3) means minor negotiation does not necessarily prevent standard form status.

Flag unilateral variation powers, sweeping indemnities and termination rights, but do not promise that an unattractive clause is automatically void. Negotiate a clear amendment where possible. Relying on a later court challenge is a poor way to plan the business’s cash flow.

What should be settled before the tenant signs

The final Commercial Lease Review Checklist should become a short decision record: amendments agreed, searches and approvals outstanding, costs accepted and dates to diarise. It should identify any unresolved issue serious enough to delay commitment.

Confirm the landlord’s title and authority, investigate registered interests and mortgagee consent, and determine whether registration is needed to protect the proposed arrangement. Settle the premises plan, incentive documents, guarantees and condition report together. Check the signing version against the negotiated changes rather than assuming the last email has been incorporated.

A useful review gives the tenant an answer it can act on: which clause should change, what wording is proposed, what evidence is missing and what risk remains if the landlord refuses. That is what turns a Commercial Lease Review Checklist into a commercial decision.

Commercial Lease Review Checklist Before You Sign

Before committing to a commercial lease, confirm what the business can do at the premises, calculate the full cost of occupation and identify the obligations that may continue after departure. Use this Commercial Lease Review Checklist to record what has been checked, what needs amendment and what remains unresolved.

Gather and reconcile the documents

• Obtain the heads of agreement, offer, draft lease, disclosure statement, incentive deed, guarantee, fit-out documents and incorporated building rules.
• Establish whether any preliminary agreement creates binding obligations and whether the deposit is refundable.
• Arrange legal review before accepting binding terms, taking possession or starting work.
• Check that rent concessions, fit-out contributions and other negotiated promises appear in the documents.
• Resolve inconsistencies between the lease, schedules, annexures and separate deeds.

Confirm the parties and premises

• Check the landlord’s identity, ownership and authority to grant the lease.
• Confirm the correct tenant entity and identify anyone giving a personal guarantee or indemnity.
• Obtain a title search and investigate registered interests, mortgagee consent and registration requirements.
• Check the premises plan and document rights to parking, storage, loading areas, signage and outdoor areas.

Establish which legal protections apply

• Determine whether the arrangement is a retail shop lease and check any applicable exclusions.
• Confirm that required disclosure documents have been provided within the applicable timeframes.
• Obtain advice before signing a disclosure waiver.
• Investigate missing, inaccurate or inconsistent disclosure information promptly.
• Check the current Queensland property law provisions and any transitional issues affecting an older lease.

Calculate the full financial commitment

• Prepare a budget covering rent, applicable GST, outgoings, insurance, security, fit-out and anticipated exit costs.
• Model rent increases across the initial term and examine how rent will be determined on renewal.
• Obtain outgoings budgets and recent actual expenditure.
• Check which outgoings are recoverable, how they are apportioned and whether capital expenditure or ownership costs are being transferred to the tenant.
• Confirm when rent and outgoings commence, including during fit-out and rent-free periods.
• Check incentive repayment triggers and calculate the potential clawback.
• Review interest, administration charges and legal costs provisions.

Verify use, approvals and fit-out

• Ensure the permitted use covers the business’s proposed activities.
• Verify necessary planning, building and operational approvals with the appropriate advisers.
• Check electrical capacity, air-conditioning, plumbing, exhaust, accessibility and other essential services.
• Obtain required landlord and other consents for proposed works.
• Allocate responsibility for approvals, works, costs and delays.
• Negotiate appropriate conditions and an exit mechanism if essential approvals cannot be obtained.
• Confirm handover requirements, access hours, trading obligations and after-hours charges.

Settle repair and make good obligations

• Prepare and agree on a dated photographic condition report before occupation.
• Record existing defects and identify the landlord’s fixtures, equipment and plant.
• Distinguish routine maintenance from structural repairs and replacement of major equipment.
• Check that agreed exclusions apply consistently across the repair, replacement and make good clauses.
• Identify which installations must be removed, including any inherited from a previous tenant.
• Define the required handback condition and obtain an estimate of likely costs.
• Agree on access, completion dates and the treatment of any cash payment instead of works.
• Check potential rent or compensation exposure if make good remains incomplete.

Review guarantees and security

• Read every personal guarantee and indemnity separately from the company’s obligations.
• Identify any liability cap and whether it includes interest, costs and make good.
• Check continuing exposure after variations, renewal, assignment, resignation or a business sale.
• Negotiate clear release events and document any agreed release.
• Review the combined burden of deposits, bank guarantees and personal undertakings.
• Specify when security may be called, any required notice and when unused security must be returned.

Protect renewal and exit options

• Record each option’s exercise window, recipient and delivery requirements.
• Diarise reminders well before the deadline and retain proof of delivery.
• Check renewal conditions, the rent-setting mechanism and whether options remain available after assignment.
• Review assignment, subletting and other consent requirements.
• Identify the information needed for a consent request and allow sufficient time.
• Establish whether the outgoing tenant and guarantors will receive a release.
• Check any break right or proposed surrender arrangement and its financial consequences.

Examine default and disruption risks

• Identify essential terms, default triggers, cross-defaults and remedy provisions.
• Assess exposure to arrears, future loss, incentive repayment, indemnities and enforcement costs.
• Check contractual notice provisions against mandatory statutory requirements.
• Review relocation and demolition rights, notice, alternative premises and compensation arrangements.
• Check rent relief and termination rights following damage, loss of access or prolonged disruption.
• Obtain advice on potentially unfair terms, including unilateral variation powers and broad indemnities.

Complete the final signing review

• Record agreed amendments, outstanding enquiries and risks the business has expressly accepted.
• Resolve any issue serious enough to delay commitment.
• Check the final signing version against every negotiated change.
• Ensure all plans, schedules, condition reports and supporting deeds are complete and attached where required.
• Confirm signing authority and execution requirements.
• Keep the executed documents and create a calendar of payment, insurance, renewal, notice and handback dates.