A lease is a legally binding contract, so it's important to thoroughly investigate the premises and lease document before you sign.

Take your time

Give yourself plenty of time to research suitable locations, investigate potential leases and ask questions.

After finding the ideal location, you may want, or the landlord may encourage you, to sign the lease immediately to secure your right to the premises. Make sure you understand all terms and conditions before you sign, as it may be difficult to get out of a lease if you change your mind. You shouldn't feel pressured into signing a lease before you are ready.

Get help from experts

Ask experts for advice to help you avoid any legal or financial problems associated with the lease.

• Solicitor or legal adviser – explain lease clauses, give legal advice, draft new clauses, negotiate terms and conditions to suit you.
• Financial adviser or accountant – review your expected cash flow so you know how much you can afford to spend leasing premises.
• Insurance company – discuss insurance-related clauses so you fully understand what is covered by the lease.
• Industry associations – provide leasing advice specific to your industry or sector.

Learn more about working with business advisers.

Speak to your local council

Councils in Queensland regulate business activities. Ask your local council if your business can operate in your desired location. Also consider the council's development plans for the area you are considering.

Choose between multiple locations

If you have a shortlist of locations, examining the lease documents will help you compare the premises. If your business needs a high traffic flow of potential clients past your door, you can expect to pay a higher rent. Lower rents may indicate the value of the property (which is often based on the volume of passing traffic) is low.

Also consider...

• Read the Retail Shop Leases Act 1994.
• Learn more about retail shop leases.
• Read the Retail Shop Leases Regulation 2016
• Find industrial land for lease.

Consider the future of your business when choosing your business premises and investigating the lease. Does your business need the flexibility of a month-to-month lease or the stability of a long-term lease?

Short-term renting

Short-term renting gives you flexibility – if you expect your business to grow significantly you can rent small premises initially and move into a bigger location as you expand. However, your landlord can ask you to leave at short notice; having to find new premises could slow the momentum of your business as you try to find new premises quickly.

Long-term leasing

Long-term leasing is ideal if you have found a location that captures your target market. A long-term lease gives you the stability to establish your business over time. If the success of your business depends considerably on its location, begin negotiations to extend or renew your lease long before it expires.

Seek advice from your solicitor or financial adviser before signing a long-term lease because you may face serious financial and legal penalties if your business is not successful and you want to break the lease early.

Leasing in a shopping centre

A retail shopping centre can be defined as 5 or more shops grouped together. The rents are often higher in shopping centres, and there are often more restrictions on leasing terms (e.g. rules for opening hours, products that can and cannot be sold).

Learn more about retail shop leases forms.

Alternatives to leasing

Buying business premises

Buying premises has long-term benefits – the property becomes a business asset, and you may be able to customise the premises. However, it can significantly increase your up-front and maintenance costs. Your financial adviser can help you decide if this option is right for you.

Running a home business

Setting up a home business lowers your overheads and can be ideal if you do not require a shopfront. However, if you need production or warehouse facilities, operating your business from home may not be suitable.

Learn more about starting and running a home business.

Co-working spaces

Co-working spaces are shared office spaces where sole operators, micro or small businesses can operate from an allocated desk space or small office. Working in these environments can assist in increasing productivity, driving innovation and expanding networks for small businesses.

Also consider...

• Take our business readiness health check to receive a personalised action plan with information and resources.
• Find out more about retail shop leases.
• Read the Retail Shop Leases Regulation 2016.
• Learn more about finding the right business location.
• Include your lease details in your business plan.

Before signing a lease, you have the opportunity to negotiate with the landlord (or their agent) to reach an agreement that meets your business needs.

Although a lease may be presented as 'standard' you can still negotiate changes to this type of contract if required. It is important to understand and consider some key leasing matters before starting negotiations.

You should seek financial, legal and business advice before entering into a lease so that you understand your rights, liabilities and obligations.

Negotiation participants

Each participant in lease negotiations will be seeking to gain something different. Understanding what each participant's interests and goals are, may help find a mutually acceptable solution.

Tenant/lessee: The business tenant or lessee will seek leasing conditions to ensure their business operation is profitable, including paying for access to the services and support they need. They will usually seek transparency and a level of control over any potential changes that could affect their profitability or operations.

Landlord/lessor: The owner of the property will generally seek optimum rent, minimum expenditure and payment of all expenses by the tenant. Landlords/lessors will usually seek a watertight lease which ensures their rights are fully protected.

Letting agent: They are engaged by the landlord to find and evaluate potential tenants and when the tenant has entered into a lease, receives commission from the landlord.

Managing agent (may also be the letting agent): They are engaged by the landlord to carry out various duties as agreed with the landlord. This might include conducting inspections, corresponding with the tenant, receipting the rent and outgoings, and monitoring for and reporting to the landlord about any breaches of the conditions of the lease.

Landlord's solicitor: They are engaged by the landlord to provide appropriate leasing documentation and legal advice to the landlord. Some leases may include clauses that the tenant must pay for any 'reasonable' legal expenses.

What can be negotiated

Price is often perceived as a starting point for many negotiations. Before going to the negotiating table you should know your 'bottom line' (the maximum price you can afford to pay). However, a skilled negotiator will first explore the wider opportunities to improve the overall package in a lease by negotiating better terms and conditions.

There is a lot that can be negotiated besides rent that can impact the profitability of the business, including:

• protection from competition; this is particularly important if the premises are in a shopping centre or group of shops owned by the same landlord
• security of tenure for the desired time
• permitted use (i.e. what you can sell, provide or make on the premises), especially if you are considering adding new products or services
• an affordable rent for the duration of the lease
• the outgoings payable and when they are due
• provisions (clauses) that will not interfere with the day-to-day running of the business or impose excessive financial burdens
• the ability to operate a profitable business.

The choice and sequence of issues for discussion is an important element of the negotiation. It is usually wise to start with an issue that is not too important so that you can afford to make a concession and thereby show readiness to compromise.

If you are not entirely comfortable with the proposed lease be prepared to say no.

Read more about strategies for negotiating.

Get help from experts

The back and forth discussions about the conditions, terms, duration and costs associated with a new lease or the extension of a current lease are all part of commercial negotiations. Disagreements on these things during negotiation doesn't mean the participants are in a dispute. Disagreements on what terms end up in the lease are a normal part of any commercial negotiation.

Negotiating does not come easily to everybody and it's a skill that can be developed over time.

Read more about negotiating successfully.

If you're not sure how to navigate a disagreement on some of the terms, you are not used to bargaining or not knowledgeable in the area of leasing, some outside help may be worth considering. For example, you may wish to be represented during any discussions.

Experts in negotiating commercial leases exist and can complement the advice from financial or legal experts. In some cases, tenants' agents may include legal or financial advice as part of their service.

Read more about working with business advisers.

Also consider...

• Find out more about retail shop leases.
• Read the Retail Shop Leases Regulation 2016.
• Learn more about finding the right business location.
• Include your lease details in your business plan.
• Watch our Understanding tenant agreements webinar to learn about the common pitfalls of business tenancy.

Tenancy costs tend to be one of the main overheads for small businesses. Disputes between landlords and tenants are common and often arise from small business owners not seeking advice or not understanding the significant impacts a lease can have on the financial viability of their business. Knowing who you are dealing with and what else is available before signing a business lease can help to avoid letting your heart rule your head in this critical business decision.

Before you sign a lease, you need to be confident that you understand and can meet all the terms and conditions. To find out if the lease is suitable for you, and to avoid expensive misunderstandings that could cost you money and potentially your business, consider these questions and discuss the answers with your solicitor and financial adviser.

Lessor or lessors agent

• Does your contract say a lot but actually tells you very little?
• Are you left wondering what it's all about?
• Do you get the feeling that information is being withheld?
• Are you immediately pressured to sign on the spot?
• Is the discussion relaxed – no pressure to sign – with time for you to properly consider things and take appropriate advice?

Lease

• Who pays the legal costs for establishing the lease?
• When does the lease start? What time period does it cover?
• Will the lease period give you time to make enough profit to get a reasonable return on your investment?
• Can both parties engage a specialist retail valuer if there is a dispute over market rent?

Rent

• What is the rent? Is it paid weekly, monthly or in advance?
• Is a deposit or other payment required?
• How are rent increases worked out?
• What happens if rent payments are late?

Options

• Do you have an option to buy the premises?
• Can you renew the lease? When, and for how long?
• Can you end the lease before it expires? If so, what are the conditions?
• Is subletting possible? If so, what are the conditions?
• Can you transfer the lease? Are any expenses involved?

Expenses

• Are there additional charges for outgoings such as rates, taxes, garbage, air conditioning or marketing? How are these charges worked out?
• Have you considered expenses such as electricity, cleaning, repairs, maintenance and refitting?
• Who is responsible for taking out the various types of insurance?

Restrictions

• Are there restrictions on the type of business, its goods or trading hours?
• When you leave the premises, can you remove fixtures, fittings or furnishings you have put in?
• Will any lease terms affect the ongoing profitability of your business?

Council approvals

• Have you checked if the lease makes it your responsibility to have all the correct planning and permitted use approvals from council, regardless of what the owner or property agent told you? (This is a very common clause in commercial leases.)
• Have you checked with council that the planned use for the premises (especially for a gym, micro-brewery or auto-related business) is permitted—not just that the zoning is correct?
• Do you have written assurances from the landlord or property agent that the approvals for your business type will be granted?

Maintenance

• Does the lease require you to maintain the premises? At whose cost?
• Can alterations or improvements be made to the premises by either party? Are there conditions?
• Do you have to return the premises to pre-lease condition?

Assignee/assignor involvement

• Has the assignor* got written approval for the assignment of the remainder of the lease?

*If you are buying a business and the seller has a lease as part of that business, they are known as the assignor. The assignor requires approval from the landlord for the assignment of the remainder of the lease to the purchaser of the business (assignee).

Also consider...

• Learn more about working with business advisers.
• Find out more about retail shop leasing.
• Read the Retail Shop Leases Regulation 2016.
• Find retail shop leases forms.
• Learn out how to conduct financial forecasting for the future of your business.
• Watch our Understanding tenant agreements webinar to learn about the common pitfalls of business tenancy.

A lease is a legally binding contract. Once signed, you are obliged to comply with all terms such as paying rent, for the full term of the lease.

If a tenant or landlord wishes to change the lease, this must be done in writing. Verbal agreements to change the lease are not binding.

It is important that both the tenant and the landlord understand and agree to the lease conditions. This will minimise disputes. It is essential that all terms and conditions in the lease are clearly worded and cannot be misread.

Common areas for confusion include:

• rent increases
• lease renewals
• amounts for outgoings
• who fixes air conditioning if it stops working
• who fixes leaks in the roof
• when mould appears in the premises
• who provides or maintains fire safety systems and equipment
• conditions for return of  bond
• how long the landlord has to return the bond after conditions are met.

Keep a copy of your lease in a safe place so you can find it easily if you need to check the wording of a clause. If you are not sure what something means, ask your solicitor to explain it to you.

Third-party resolution support

The Queensland Small Business Commissioner provides dispute support for tenants and landlords in commercial and retail shop leasing disputes.

Alternative dispute resolution (ADR) such as mediation is an alternative to going to court to resolve your dispute. ADR is generally quicker and cheaper than court, gives you more control over the outcome and is more likely to preserve the relationship between landlord and tenant.

Some leasing disputes may fall under the jurisdiction of the Body Corporate and Community Management Commissioner. Use our dispute resolution referral tool to understand which service you should contact to help you with your dispute.

If you can't reach a resolution through an ADR process such as mediation, you can take the matter to court or a tribunal for a decision. This step should be the last resort—court is expensive, time consuming and the outcome is out of your control.

Also consider...

• Find out more about retail shop leasing.
• Learn about resolving disputes.
• Find out how to negotiate successfully.
• Watch our Understanding tenant agreements webinar to learn about the common pitfalls of business tenancy.

If you are considering exiting your lease and are unsure of your rights and obligations, you should seek independent legal advice before taking any action.

A lease can end for various reasons including:

• the lease term has expired
• you have sent or received a notice for a breach of lease (e.g. not paying rent)
• voluntarily by notice (for periodic tenancies)
• for another reason (e.g. redevelopment, mutual agreement).

If you end a lease early ('breaking the lease'), you may be liable for paying the rent owed from the day the lease is ended until the end of the agreed term of the lease. You may also have to pay other compensation set out in the lease.

Fixed term leases

A fixed term lease can be ended according to the terms and conditions set out in the lease. This may include:

• giving notice in a particular way
• giving a certain amount of notice
• completing documented 'make good' obligations.

If you want to continue the lease, you should write to the other party (or their agent) well before the expiry date and ask or offer to negotiate a new lease. Neither party is under any obligation to agree and any new lease may have different terms and conditions, higher rent, different guarantees, or other changes.

As this is a commercial negotiation, you should start this process early and be mindful that this is a matter between you and the other party.

As a tenant, unless both parties agree otherwise, you must vacate the premises when your lease term has expired.

Redevelopment and relocation

For a fixed term lease, a redevelopment clause may allow the landlord to end a lease early to renovate or redevelop the premises. In these circumstances you could find yourself without premises leading to severe impacts on your business.

If you have agreed to a relocation clause in your lease, check to see whether you negotiated to be paid compensation for loss of trade and to cover your relocation costs. Retail shop leases may also need to meet specific requirements that cover relocation of your business within the same centre.

Termination by mutual agreement

Under a fixed term lease, the landlord and tenant can mutually agree to end the lease early.

As a tenant, if you need to end the lease early, you should ensure that you discuss with your landlord and clarify in writing about 'making good' the premises and your financial obligations to each other.

A landlord is not obliged to release you from your agreement but they may be willing to negotiate if you are facing serious financial difficulties or other circumstances beyond your control. It is important to record any agreement in writing. Disputes commonly arise over claims of unmet obligations or misunderstandings of what is owing after the mutual termination of leases.

Periodic tenancies

A periodic tenancy rolls on a weekly, monthly or yearly basis with no end date. The lease may be periodic from the start, or a fixed lease may end but the parties agree to continue the tenancy on a periodic basis. Periodic tenancies provide flexibility for tenants and landlords who may be unsure about the long term or only need a short-term arrangement.

Under a periodic tenancy, either party can terminate the lease (without reason) on the last day of the next period of the tenancy (termination date) by giving a termination notice at least one whole period that rent applies before that date. (e.g. for a month-to-month agreement, at least 1 month before the termination date). This could leave either party with as little as 1 month to vacate and 'make good' the premises.

You should consider the benefits and risks of a periodic tenancy and what you would do if you or the other party choose to terminate the tenancy.

Giving notice to terminate a lease

Under the Property Law Act 2023 there are prescribed forms that a landlord must give to the tenant to rectify any breaches of the lease. This step is usually required before a landlord can subsequently end the lease if the breaches are not remedied.

Landlords must use the following forms:

• Form 7 – Notice to remedy breach
• Form 9 – Notice to terminate lease.

Most fixed term leases contain conditions that allow the landlord to recover legal costs incurred in relation to the lease, including the cost to have a legal practitioner serve a notice on a tenant.

Make good provision

When a tenant leaves the premises, they will generally be required to leave the premises in the condition it was in at the start of the lease. This is known as a 'make good' provision. Disputes commonly arise in relation to the definition of and compliance with make good provisions. You should ensure this is clearly defined in the lease, as well as keeping a record of the condition of the premises when you started the lease.

For fixed term leases, there may be a general make good clause or there may be other specific make good clauses. For example, this could involve cleaning the premises, repairing any damage, removing fixtures or fittings, replacing carpets and repainting.

For periodic tenancies, as a tenant you are generally obliged to repair damage you or others (on the premises with your permission) have caused. You and your landlord should consider the condition at the start of the lease (excluding damage from fire, flood, lightning, storm and reasonable wear and tear) and should negotiate any repairs when the notice to terminate is given.

If you do not fulfil your obligations under the lease when you leave, your landlord may carry out the work and take the cost from your bond or bank guarantee. If you are unsure what this means for your lease, discuss this with your landlord or seek independent legal advice.

Make sure you allow enough time at the end of your lease to complete the 'make good' requirements. Record any agreements about make good in writing.

Recovering your bond, deposit or bank guarantee

As a tenant, if you have reasonably fulfilled your 'make good' obligations, the landlord should give back your bond, deposit or bank guarantee.

However, there may be other conditions under a fixed term lease that must be satisfied before this can occur. For example, there may be penalties in your lease agreement for ending a fixed term lease early or not complying with the terms and conditions of your lease.

In some circumstances a landlord may be able to lawfully take all or part of your bank guarantee, bond or deposit if you fail to fulfil your obligations when ending the lease.

In Queensland, there is no legislative requirement for commercial or retail shop lease security deposits provided directly to a landlord to be held in a particular manner, nor are they required to be registered with a government body, a solicitor or other authority. If the bond is paid to a licenced real estate agent, trust accounting laws may apply.

Also consider...

• Find out more about retail shop leases.
• Read the Retail Shop Leases Act 1994 for specific requirements for retail shop leases in Queensland.
• View the Property Law Act 2023 for other commercial property leases.