Commercial Lease Negotiation
Commercial lease negotiation is the process of changing the proposed lease terms before they’re signed, so the deal works for the business. We negotiate commercial, retail, and industrial leases for tenants and landlords across Australia. For the full range of services we offer, see commercial lease lawyers.
A lease drafted by the landlord’s solicitor will favour the landlord. A lease prepared from a template will usually miss things both sides care about. Negotiation is where the deal actually gets balanced.
What’s negotiable in a commercial lease
More than most tenants assume. The realistic items on the table:
Money
- Rent - base rent, often subject to market evidence
- Rent free period - typically a few weeks to several months at the start of the term
- Fit-out contribution - landlord cash or works contribution to the tenant’s fit-out
- Cash incentive - straight rebate, usually documented in an incentive deed
- Outgoings - what’s recoverable, with caps where appropriate
- Security amount - bank guarantee or security deposit, usually three to six months rent
- Personal guarantees - scope, cap, and release point on assignment
Term and flexibility
- Initial term - length of the fixed term
- Options to renew - number, length, and the window for exercising them
- Early termination - break right or surrender mechanism
- Assignment and subletting - when consent is required and on what conditions
- Holdover - what happens after the term ends if neither side acts
Risk and obligations
- Permitted use - wide enough to cover how the business will trade
- Make good - scope (strip out, paint and patch, or full reinstatement)
- Repairs and maintenance - split between landlord and tenant, including essential safety measures
- Demolition clause - notice period and any compensation
- Insurance - public liability, plate glass, business interruption
- Rent reviews - type (fixed, CPI, market) and ratchet protection
How we negotiate
- Review the lease and disclosure statement. We come to negotiation with a clear list of issues ranked by importance.
- Agree the priority list with you. Not every issue is worth pushing on. We focus on what moves the dial.
- Send a marked-up lease. We draft the amendments and a covering letter explaining the rationale.
- Run the back and forth. We deal directly with the other side’s solicitor and report back as positions move.
- Lock it in. Once agreed, we make sure the final lease and disclosure statement match what was negotiated.
What good negotiation looks like
Negotiation isn’t asking for everything and hoping. It’s knowing which clauses are market standard, which the relevant Act actually permits, and which the landlord cares about most. The best leverage is usually:
- The market - if comparable premises are available, the landlord will move on rent and incentives
- The Act - for retail leases governed by legislation such as the Retail Leases Act 2003 (Vic), many tenant-side issues are non-negotiable as a matter of law
- Time - landlords with vacant premises will move faster than landlords with a queue of interested tenants
- The whole deal - concessions in one area can be traded for movement in another
Common negotiation outcomes
For tenants we typically achieve:
- A rent free period or fit-out contribution
- A wider permitted use clause
- A capped outgoings figure or specific exclusions
- A clear, narrower make good obligation
- A release of personal guarantee on assignment
- A workable option mechanism with longer exercise window
- Removal of (or notice and compensation for) a demolition clause
For landlords we typically achieve:
- Watertight rent review with ratchet protection
- Recoverable outgoings drafted to the relevant Act
- Adequate security and a director guarantee where needed
- Clear default and re-entry mechanism
- Make good the landlord can actually enforce
Negotiation vs review
Lease review and lease negotiation are different services. Review is the written advice on what the lease means and where it should change. Negotiation is the work of actually getting those changes made. Many clients use both; some take the review and run the negotiation themselves.
Frequently asked questions
Will the landlord agree to changes?
Most landlords expect negotiation and will agree to reasonable amendments, especially on issues the relevant retail leases Act effectively requires. Highly templated leases (large landlords, shopping centres) move less than private landlords, but they still move.
Can I negotiate after signing?
Generally no. Once the lease is signed it’s binding. Mid-term changes need a deed of variation, which requires both sides to agree. Negotiate before signing - and if a dispute does arise, see our lease disputes service.
How much rent free is normal?
It depends on the market, the term, and the type of premises. For longer-term retail and office leases, several weeks to several months is common. We benchmark against current market evidence.
Are incentives taxable?
The tax treatment of lease incentives depends on how they’re structured (cash, fit-out contribution, rent free) and the tenant’s circumstances. We can flag the issues, and recommend you confirm with your accountant before locking in the structure.
What is an incentive deed?
A separate document that records the incentive (usually cash or fit-out contribution) and the conditions on it, including any clawback if the tenant exits the lease early.
Can I negotiate the demolition clause?
Yes. Useful negotiation points: longer notice period, compensation for fit-out and relocation, restrictions on when the clause can be triggered.
Can you negotiate without doing the review first?
We need to know the lease before we negotiate, so a review is usually the first step. If you’ve already had it reviewed elsewhere, send us the report and we can take it from there.
How much does lease negotiation cost?
Quoted as a fixed fee or an estimate after we’ve seen the lease and the issues list. Send us the documents and we’ll come back with a quote within one business day.
Talk to a commercial lease negotiation lawyer
Send us the lease and the deal terms, and we’ll come back with a quote and a clear next step.