As a business owner, ensuring you enter a favourable commercial lease can make a big difference to your bottom line. Your lease should align with your business needs to ensure room for growth and scalability.

There are key clauses you should look for, from maintenance to quiet enjoyment. Reviewing your lease with a property lawyer will help to ensure your lease doesn’t hamstring you, and allows you to run your business as you expect to.

These are seven important terms within a commercial lease.

State of the premises

Firstly, you should review the premises carefully to ensure it’s suitable to conduct business.

The best way to do this is to acquire a condition report that includes photos of the property and a list of defects. This report provides evidence of the condition of the premises for later reference.

After inspection, you can negotiate with the landlord to repair any defects. This is essential to ensure your business can be conducted in a functional space, without things like plumbing issues or a leaky roof.

Look out for a make-good clause. This clause requires you to return the property in the state you obtained it. So if you scratch the paint, you’re required to touch it up.

However, if the condition report outlined scratches on the paint initially, you’re not obligated to repair it. Also, you’re not obligated to repair fair wear such as carpet deterioration from people walking on it.

Health and Safety

Under the Health and Safety at Work Act, your landlord is a PCBU (Person Conducting a Business or Undertaking). They must ensure the property supplied to you is without risks to those who:

• Use the property as a workplace
• Execute a foreseeable activity such as office cleaning or repairs
• Are at the premises and whose health and safety may be affected by the property, such as visitors

Your landlord must analyse and test the property to ensure you can safely conduct business activities. 

For example, the property must be tested for asbestos, and an asbestos management plan must be shared with you to eliminate any risks. The landlord must develop health and safety plans with you, such as fire escapes or processes when repairs are carried out.

Right to quiet enjoyment

As a commercial tenant, your lease should state that you have the right to quiet enjoyment.

This right entitles you to peacefully and lawfully use the property to your benefit without disruptions. Essentially, your landlord can’t interfere with your use of the premises while you are a tenant.

If you believe your landlord is breaching your right to quiet enjoyment, you can inform them of this and request they leave you alone. If no reform is made, you can claim damages, which is usually available in extreme cases of mental distress and inconvenience.

Right of exclusive possession

Your lease should also outline your right to exclusive possession. This right enables you to exclude other individuals from the property you are leasing. 

Likewise, you can exclude your landlord unless they have a legal right to enter the property. Your landlord can enter when:

• Repairing damages
• Inspecting the property
• Serving a notice to terminate your lease

Maintenance and repairs

To avoid confusion, your lease should outline which party is responsible for what maintenance.

Commonly, your landlord will be responsible for maintaining the property, such as ensuring the building is weatherproof. They will also need to repair any defects outlined in the condition report. However, their obligations will not extend to minor damages.

For example, your landlord is responsible for repairing the elevator if it malfunctions, but they don’t have to replace the carpet if you’ve damaged it. If damages happen while you are leasing the property, you will have to repair them.

Assigning the lease

If you plan on assigning your lease in the future, or you want to have the option, you must ensure it’s permitted within your lease. 

When considering your request for an assignment, your landlord must act reasonably. For example, they may request references and a CV from the party you are planning to assign the lease to, and they can’t decline it without good reason.

When assigning the lease, you can do so through a deed of assignment that outlines:

• Parties
• The consent of all parties including you, your landlord and the party being assigned the lease
• Description of the property being assigned
• Lease obligations  

Insurance

Your lease must outline your landlord’s insurance obligations. Your landlord is required to pay for repair costs on the basis they’re insured against things like:

• Fire
• Floods
• Explosions
• Lightning and sirens
• Earthquakes
• Volcanic eruptions

This just means that if your business is harmed due to damage to the property, you can be compensated through your landlord’s insurance. In saying that, you won’t have the right to compensation if the harm suffered is from your own doing.

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