What is a Commercial Property Lease?

A commercial property lease is a legally binding agreement between a landlord and a tenant that grants the tenant the right to use a commercial property for business purposes. Unlike residential leases, commercial leases are often more complex, with terms that vary depending on the nature of the business, location, and specific agreement between the parties.

Different Types of Commercial Leases

There are several types of commercial leases, each with its own structure and cost implications. Typically the two most common types we see in Bendigo are:

• Net Lease: The tenant pays rent plus the building outgoings

• Gross Lease: The tenant single rental figure, while the landlord covers most expenses, including property taxes, insurance, and maintenance.

What Does a Commercial Property Lease Agreement Include?

A commercial lease agreement outlines the rights and responsibilities of both parties. Key components include:

• Lease Term & Renewal Options: Specifies the duration of the lease and whether it can be renewed.

• Rent & Payment Terms: Details the base rent, due dates, and any additional costs.

• Permitted Use: Defines how the tenant can use the property.

• Maintenance & Repairs: Clarifies responsibilities for property upkeep.

• Security Deposit: The amount required as a deposit and conditions for its return.

• Termination & Exit Clauses: Outlines conditions under which either party can end the lease.

• Assignment & Subletting: Specifies if the tenant can transfer the lease or sublet the space to another business, and if the landlord’s consent is required.

• GST Treatment: In Australia, commercial lease agreements may include Goods and Services Tax (GST). Generally, if the landlord is registered for GST, they must charge GST on the rent. The lease agreement should clearly state whether GST is included in the rent or is an additional charge. Tenants who are also registered for GST may be able to claim input tax credits on the GST paid.

Understanding the terms of a commercial lease is crucial for both landlords and tenants to ensure a smooth and beneficial agreement. Seeking legal advice before signing can help prevent disputes and ensure clarity in obligations.