What is a Commercial Lease?

A commercial lease is an agreement to rent a premises that you will operate your business out of. Common examples would include offices, warehouses and industrial spaces. You will have to negotiate the terms and conditions of your agreement with the landlord of the property. This can often be a complex process, especially if you a starting a new business. A commercial lease lawyer can help negotiate your agreement to ensure the terms are reasonable and fair.

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Why Should My Business Sign One?

One of the biggest jobs for you as a business owner is finding a space to operate in. Picking the perfect spot can be hard enough itself, then you have to consider whether to buy or lease the property. Leasing a commercial space is a lot more realistic especially if you’re starting a new business. Purchasing a space outright requires a large investment and involves various extra costs, such as for fit outs, rates and repairs.

Commercial leases can also be short term, safeguarding your new business from a long term financial commitment at a time where money may not always be available.  If you are interested in the short-term option be aware that their maximum duration varies by state.

What to Look Out For?

If you feel that a commercial lease best suits your current business situation, there are few things you should consider first.

Lease Duration and Renewal

Make sure the length of the lease is long enough for you to make a return on your investment. You should also look to have an option to renew included. This is so that when the lease ends you are not left in the lurch. If you are a new business and still establishing yourself at the end of a lease, short-term renewal options are available, such as a one year extension.

Rent

It is important to negotiate an affordable rent amount as well as an appropriate review type. Rent amounts are typically reviewed annually and can be based on consumer price index, fixed amounts, or market rates.

Premises Use

Your lease agreement will include terms that outline what you are allowed to do on the premises. Make sure that these terms allow you to do all the activities you need to conduct your business. It’s also helpful to think long term about any activity you may carry out in the future as your business expands.

Costs

There are a variety of extra costs that come with signing a commercial lease. These costs are on top of the rent amount and considering whether you can afford them is vital. Having to pay stamp duty on your commercial lease in certain circumstances is a cost that often goes unnoticed. Other common examples include:

  • Insurance
  • Legal costs
  • Operating costs
  • Fit Out
  • Internal Maintenance

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Christopher Tsiknas

Chris is a member of the content team at LawPath. He is currently studying a Bachelor of Business and Bachelor of Laws at UTS. He is interested in how marketing communication strategies can influence the future of legal technology.