Signing a commercial lease is one of the biggest financial commitments a small business makes — often second only to hiring staff. Unlike residential leases, commercial leases are largely unregulated, and the terms are negotiable. What you agree to upfront will bind you for years.
Key terms to negotiate before signing: rent review mechanism (fixed percentage increases are more predictable than market reviews), lease term and renewal options (a 3+3 year lease gives you security with an exit point), outgoings (ask for a cap or a detailed list — "all outgoings" can include council rates, water, building insurance, body corporate fees, and land tax), and the make-good clause (your obligation to restore the premises to its original condition when the lease ends — this can cost tens of thousands of dollars if not capped or negotiated out).
Most states and territories have retail lease legislation that provides additional protections if your premises are in a retail shopping centre or strip and your occupancy cost is below a threshold (typically $1 million in annual rent). These laws require the landlord to provide a disclosure statement before you sign, give you a minimum 5-year term, and restrict certain lease terms. Check your state's legislation: Retail Leases Act (NSW/VIC), Retail Shop Leases Act (QLD), Commercial Tenancy Act (WA).
Always have a commercial lawyer review the lease before you sign. The cost ($1,000-$3,000) is trivial compared to the exposure of a bad lease over 3-5 years. Pay particular attention to personal guarantees — many landlords require the director to personally guarantee the lease, which means your personal assets are at risk if the business can't pay rent.