Reading commercial lease clauses before you buy

When a vendor presents a rent roll, the headline figure rarely tells the full story. The lease documents determine what income you can actually rely on after settlement. Before you instruct a solicitor, there are several clauses worth reading yourself.

Rent review mechanisms

Australian commercial leases typically use CPI, fixed percentage, or market review methods. CPI reviews are predictable but can lag market movement. Market reviews require a valuer if parties disagree, which can delay rent increases. Note whether the review is upward-only or allows decreases.

Assignment and change-of-control

Some leases restrict assignment without landlord consent or trigger a review if ownership of the tenant entity changes. If you are buying a property where the tenant is a related entity of the vendor, confirm the lease survives the sale and whether a new deed is required.

Make-good obligations

At lease end, tenants may be required to restore the premises to base building condition. A tenant nearing expiry with substantial make-good liability may negotiate poorly on renewal or vacate, leaving you with vacancy and refurbishment costs.

Outgoings recovery caps

Check whether outgoings are fully recoverable or capped. A net lease with uncapped outgoings shifts rising council rates and insurance to the tenant. A gross lease with a cap exposes the landlord to cost increases.

What to request from the vendor

Ask for executed lease copies, any side deeds or rent concessions, the last three years of outgoings reconciliations, and correspondence about pending rent reviews or disputes. Gaps in documentation are themselves a risk signal.

Independent acquisition advisory can verify the rent roll against these documents before you commit a deposit.