A Sydney commercial tenant walked out of a signing meeting last week carrying a twenty-six-page lease she had never actually read. She assumed her agent had covered the important parts. Three months in, she discovered the outgoings cap she thought existed was never in the document, and she now owes seventeen thousand dollars in retrospective land tax and building insurance. By the time a lease agreement lawyer fixes that kind of problem, it costs far more than having one review it before you sign.
A lease agreement lawyer drafts, reviews and negotiates commercial and retail leases for landlords and tenants across Sydney. They read the contract, explain what each clause means for your business, spot the expensive traps, negotiate better terms, and make sure the lease matches what you thought you were getting. For tenants, that means fewer nasty surprises after you move in. For landlords, it means a lease that protects your property and keeps the rent coming in.
Key Takeaways
- Sign nothing before you get independent legal advice – agents work for the landlord.
- Know whether NSW retail lease law applies to your tenancy, it changes everything.
- Rent increases, outgoings and make-good obligations cost far more than you first think.
- Guarantees put your personal assets at risk – negotiate caps and step-down clauses first.
- A lawyer reviewing the lease before you sign costs a fraction of fixing problems later.
1. Know Whether the Retail Leases Act 1994 Covers Your Lease
This is the first question a good lawyer asks, and it decides everything else. If your lease is a retail lease under NSW’s Retail Leases Act 1994, the landlord has to give you a disclosure statement at least seven days before you sign, you get extra protections around rent reviews and outgoings, and any dispute has to go through mediation before it lands in court.
Whether the Act applies depends on what your business does and how the premises are used, not just the fact that it is a shop in Sydney CBD. A cafe, salon, clothing boutique, medical clinic or gym generally qualifies as retail. An office, warehouse, showroom or consulting suite usually does not. Where the business is partly retail and partly something else, the dominant use decides. If you are taking space in a shopping centre and selling directly to the public, you are almost certainly covered.
The landlord’s disclosure statement lists the rent, outgoings, any repairs or fit-out you are responsible for, and the landlord’s estimate of what those outgoings will cost you each year. If the landlord does not give it to you seven days before signing, or if it is incomplete or misleading, you can terminate the lease within six months and walk away. That protection exists because landlords were burying expensive obligations in fifty-page documents and presenting them at signing with no time to read.
If the Act does not apply, you get whatever protections the lease contract itself gives you, and nothing more. The landlord can charge you almost any outgoing, increase rent however the lease allows, and impose make-good obligations with no cap. The contract is everything, which is why having a lawyer review it before you sign becomes even more important for a commercial lease than for a retail one.
2. Understand How Your Rent Will Increase Over the Term
Rent rarely stays the same for five years. Most Sydney leases include annual rent reviews, and the mechanism matters far more than the starting figure. A fixed-percentage increase sounds simple until you realise it compounds every year. A market review can double your rent if the suburb gets popular. A CPI review tracks inflation, which hit seven percent in 2022 and could do it again.
Fixed increases are predictable but inflexible. A lease with four percent annual increases will cost you four percent more every year whether the economy crashes or your sales drop. CPI reviews tie rent to the consumer price index, which moves with inflation. They protect landlords from losing real income when prices rise, but they also mean your rent jumps in the same years your other costs do. Market reviews reset the rent to whatever similar premises are fetching at review time, which can be brutal in a tight market.
Sydney CBD retail vacancy sat at 4.3 percent in the second half of 2025, the fifth consecutive half-year of tightening. When vacancy falls and rents rise, market reviews push your cost up fast. Some leases cap market increases at a percentage, which gives you some protection. Others include a ratchet clause that says rent can only go up, never down, even if the market crashes. NSW retail leasing law generally prohibits ratchet clauses in retail leases, but they still appear in commercial leases, and you need a lawyer to spot them and negotiate them out.
If the lease gives you options to renew, check what happens to rent at the start of each option period. Some leases reset rent to market at option time, which can mean a huge jump just when you thought you had certainty. Others continue the same review mechanism from the initial term, which is far more tenant-friendly. The terms sheet might say “market rent at option commencement” in fine print, and if you miss it, you can be locked into a lease where the landlord can double your rent every five years.
| Review Type | How It Works | Best For |
|---|---|---|
| Fixed % | Rent increases by set percentage each year, compounding | Stable markets where you want predictability |
| CPI | Rent tracks consumer price index, usually quarterly | Tenants who want rent tied to general inflation |
| Market | Rent resets to current market rate at review date | Landlords in rising markets, risky for tenants |
| Hybrid | Greater of CPI or fixed %, sometimes with a cap | Landlords who want protection both ways |
3. Clarify Exactly What Outgoings You Are Paying
Outgoings are all the costs of running the building that the landlord passes on to tenants. They can include council rates, water rates, land tax, building insurance, fire-service levies, common-area cleaning, lifts, security, garden maintenance, building-management fees, and sometimes even the landlord’s own legal and accounting fees. In a shopping centre they also include marketing levies, centre-management fees and sinking funds for future capital works.
The lease will say either that you pay a proportion of outgoings or that you pay all outgoings attributable to your premises. Proportional outgoings are calculated by your floor area as a percentage of the whole building. If you lease two hundred square metres in a two-thousand-square-metre building, you pay ten percent of the total. That sounds fair until you realise the landlord defines what counts as the “whole building” and what counts as an outgoing, and both definitions can be stretched.
Land tax is the one that catches tenants out most often. Landlords commonly recover it as an outgoing, even though it is a tax on the landlord’s ownership of the land and has nothing to do with you running your business there. NSW retail leasing law caps how much land tax a landlord can recover from retail tenants, but no such cap exists for commercial tenants. If the landlord owns multiple properties and gets hit with a higher land-tax bracket, you can end up paying a share of tax on properties you have never seen.
For retail leases covered by the Act, the landlord’s disclosure statement has to estimate your annual outgoings. If the real figure comes in higher than one hundred and fifteen percent of the estimate, you can challenge it. For commercial leases, there is no such protection. The landlord can budget low to make the deal look cheap, then send you a bill for the real amount six months later. The only control you have is what you negotiate into the lease upfront, which is why this is one of the main terms worth pushing on before you sign.
4. Check Make-Good and End-of-Lease Obligations Early
Make-good is the work the tenant has to do at the end of the lease to hand the premises back in the condition the lease requires. Most leases say you have to remove anything you installed, reinstate walls you knocked down, repaint, repair damage and leave the place as you found it, fair wear and tear excepted. The phrase “fair wear and tear” does almost no work in practice. Landlords interpret it narrowly, and tenants discover at the end of a five-year lease that they are liable for things they assumed were normal use.
Where tenants fit out the premises heavily – a restaurant, gym, medical clinic or salon – make-good costs can run into six figures. One Sydney leasing firm puts the exposure at anywhere from tens of thousands to over two hundred thousand dollars for tenants with extensive fit-outs and poorly defined make-good clauses. The landlord can require you to remove kitchen exhaust systems, air conditioning you installed, partition walls, flooring, cabling, signage and even paint you applied to walls, then reinstate the original finishes, all at your cost.
The time to negotiate make-good is before you sign, not when you are trying to exit the lease five years later. Ask for a make-good specification to be attached to the lease that lists exactly what you must remove and what you can leave. Negotiate to exclude items the landlord will benefit from – an upgraded air-conditioning system, for example, or new carpet that improves the premises. Push for a monetary cap on make-good costs, or for the right to hand back the premises as-is and let the landlord keep a portion of your bond instead.
If the lease is silent on make-good, the default position is that you reinstate the premises to their original condition, which almost always costs more than you expect. A lawyer reviewing the lease before you sign will flag vague or onerous make-good clauses, draft a specification that limits your liability, and negotiate a fair outcome. Fixing it at signing costs you nothing. Fixing it at exit can cost you the lease of your next premises, because you will be paying for two at once while the landlord decides whether the make-good work is good enough.
5. Negotiate Personal and Bank Guarantees Before You Commit
Landlords nearly always ask for security beyond the lease itself. For tenants operating through a company, that means a personal guarantee from the directors, a bank guarantee, or both. A personal guarantee makes you personally liable for the tenant company’s obligations under the lease. If the company defaults, the landlord can sue you personally and take your house, your savings and any other assets you own to recover the debt.
Bank guarantees work differently. The tenant pays a bank to issue a guarantee in the landlord’s favour, usually for an amount equal to several months’ rent plus outgoings. The bank holds cash or other security from the tenant as collateral. If the tenant defaults, the landlord calls on the bank guarantee and the bank pays the landlord immediately, then recovers the money from the tenant. Bank guarantees cost money to set up and tie up your cash or credit for the life of the lease, but they cap your exposure to the guaranteed amount, unlike a personal guarantee which is usually unlimited.
Everything about guarantees is negotiable. You can negotiate a cap on a personal guarantee – for example, limiting it to twelve months’ rent and outgoings instead of the whole lease term. You can negotiate for the guarantee to fall away if you assign the lease to a new tenant, or to step down after you have paid rent on time for two years. You can negotiate for a bank guarantee instead of a personal one, or for a lower bank-guarantee amount. Landlords in a tight Sydney market may push back hard, but they will usually accept something less than unlimited personal exposure from every director, especially where the tenant company has a trading history and solid financials.
Do not sign a guarantee without reading it. Guarantees are separate contracts, and they often include terms that make you liable for costs beyond the rent – legal fees, make-good, damages, even the landlord’s costs of finding a new tenant. Some guarantees say that if the landlord gives the tenant more time to pay or varies the lease, the guarantee continues anyway, which means the landlord can be generous to your company while keeping you on the hook personally. A lawyer will review the guarantee deed alongside the lease, spot the traps, and negotiate the same protections into the guarantee that you fought for in the lease itself.
6. Get Independent Legal Advice Before You Sign the Heads of Agreement
Heads of agreement – also called a letter of offer, terms sheet or offer to lease – is the document the agent gives you before the formal lease is drafted. It sets out the basic deal: the rent, the term, any options to renew, rent-free periods, fit-out contributions, who pays what, and the key obligations of each side. It usually says the terms are subject to the landlord’s solicitor preparing a formal lease, and subject to the parties signing that lease.
Most tenants think heads of agreement is not binding, so they sign it without legal advice and assume they can negotiate later when the real lease arrives. That is wrong on two counts. First, heads of agreement can be binding depending on how it is worded, and courts in NSW have found tenants bound to lease terms they thought were still being negotiated. Second, even where it is not binding, once you have signed heads of agreement the landlord’s lawyer will draft a lease that matches it word for word, and the landlord will resist any change you ask for because you already agreed to the terms.
The time to negotiate is before you sign the heads of agreement, not after. Show it to your lawyer first. They will pick up missing terms, vague wording, unfair rent-review mechanisms, unlimited outgoings, onerous make-good clauses, personal-guarantee requirements and restricted assignment rights, and they will negotiate better terms before you commit. The agent will push you to sign quickly because another tenant is interested, or the landlord is going overseas, or the offer expires Friday. Ignore the pressure. A landlord who is serious about leasing to you will wait three days for you to get legal advice. A landlord who will not wait that long is either running a bidding war or trying to lock you into terms you will regret.
Once you sign heads of agreement, your negotiating position weakens. You have already shown the landlord you are willing to take the premises on the terms offered, and asking to change those terms now makes you look difficult or uncommitted. The landlord has usually taken the property off the market, knocked back other offers and instructed their solicitor to draft the lease. Backing out or asking for major changes at that point can cost you the deal, or cost you money if the heads of agreement included a non-refundable deposit or an agreement to reimburse the landlord’s legal costs regardless of whether the lease completes.
Sarah Walsh reviews and negotiates heads of agreement for both tenants and landlords across Sydney. For tenants, she discusses what you need from the lease, advises whether the heads of agreement delivers it, and requests amendments before you sign. For landlords, she ensures the heads of agreement protects your position and commits the tenant to terms that will carry through to the formal lease. Either way, she makes sure both sides know exactly what they are committing to before a solicitor spends weeks drafting a forty-page document no one can change.
Get Your Lease Reviewed Before You Sign
Most lease problems start the day you sign, not the day you discover them. A lease that looked fine when the market was good becomes unworkable when your sales drop or the landlord changes. Rent-review clauses, outgoings definitions, make-good obligations and personal guarantees all carry long-term financial consequences that only show up later, often when you try to sell the business or exit the lease early.
Sarah Walsh Conveyancing & Leasing reviews and negotiates commercial and retail leases for tenants and landlords across Sydney. She explains what the lease really says, spots the expensive traps, and negotiates terms that protect your business for the life of the lease. Her fees are fixed, so you know the cost before you start. Call 0493 291 572, email sarah@sarahwalshconveyancing.com.au or book an initial chat to discuss your lease before you commit.
Frequently Asked Questions
Do you need a solicitor to agree a lease?
You are not legally required to have a solicitor review a commercial or retail lease before you sign it, but signing without independent legal advice is a serious financial risk. Leases run for years, and mistakes in the rent-review clause, outgoings, make-good obligations or assignment rights can cost you tens of thousands of dollars over the term. A solicitor reads the lease, explains what each clause means for your business, negotiates better terms, and makes sure the lease matches what you thought you were getting. The cost of a review is a fraction of what it costs to fix lease problems later, or to exit a lease you cannot afford to stay in.
What are red flags for lawyers?
Red flags in a lease include unlimited outgoings with no cap or itemised list, market rent reviews with no ceiling, ratchet clauses that stop rent ever falling, vague or onerous make-good obligations with no specification, unlimited personal guarantees from directors, clauses that prohibit subletting or assigning the lease, and any clause that lets the landlord terminate the lease without a tenant default. Also watch for clauses buried in schedules or defined terms that contradict what the heads of agreement said, particularly around rent-free periods, fit-out contributions and who pays legal and registration costs. A good lawyer flags all of these and negotiates them before you sign.
Can a lawyer charge you without a fee agreement?
No. Under NSW legal profession rules, a lawyer must give you a written costs agreement before they start work, or as soon as practicable after. The agreement sets out what the lawyer will do, how much it will cost, how and when you have to pay, and what happens if you disagree about the bill. If a lawyer does work without giving you a costs agreement, they may not be able to recover their fees, and you can apply to have the bill reviewed. Always ask for a fixed-fee quote or a clear estimate before you instruct a lawyer, and get it in writing. Sarah Walsh Conveyancing & Leasing provides fixed-fee quotes for lease reviews and negotiations, so you know the cost before you commit.
Where can tenants in NSW get free legal advice?
Tenants in NSW can contact the Tenants’ Union of NSW for free information and advice about residential tenancies, but commercial and retail leases are outside their scope. For retail leases covered by the Retail Leases Act 1994, NSW Fair Trading offers free mediation services if a dispute arises, but they do not give legal advice before you sign. Legal Aid NSW provides free legal help for some matters, but commercial leasing is generally not covered. Community legal centres occasionally help small businesses, but their resources are limited and they cannot usually take on complex lease negotiations. For commercial and retail leasing, the practical option is to pay a lawyer for a fixed-fee review before you sign, which prevents the disputes free services are designed to resolve.
What is a cooling off period?
A cooling-off period is a time after you sign a contract during which you can change your mind, pull out of the deal, and get most or all of your deposit back. In NSW residential property contracts, buyers get a five-business-day cooling-off period after exchange unless they waive it or buy at auction. Commercial and retail leases generally have no cooling-off period at all. Once you sign, you are bound, unless the lease itself or the heads of agreement says otherwise or the contract is void for some other reason. That is why getting legal advice before you sign a lease is far more important than for a residential property purchase – you cannot change your mind a few days later and walk away.
What This Means for Lease Agreement Lawyer
A lease agreement ties you to a property and a set of obligations for years, often at a cost that grows faster than your business. Signing without independent legal advice leaves you exposed to rent increases, outgoings bills, make-good costs and personal liability that you did not see coming. A good lawyer reviews the lease before you commit, explains what you are really agreeing to, negotiates better terms, and makes sure the document matches the deal you thought you were getting. The difference between a lease reviewed before signing and one reviewed after a problem surfaces is the difference between a manageable cost and a business-ending liability. Get advice early, and get it in writing.
Have a lease or contract to sign?
Sarah Walsh reviews, drafts and negotiates commercial and retail leases for tenants and landlords, and handles conveyancing for buyers and sellers across Sydney, on a fixed fee. Get it checked before you sign.