Commercial Lease Risk Assessment: Identifying Red Flags & Legal Tips Before You Sign

For most business owners, a commercial lease is the second largest expense after payroll—and often the longest-reaching legal obligation you will sign. While a good location drives growth, a bad lease can quietly erode your profit margins for years.

Before You Sign: Do You Know the Answers?

Before committing to a five or ten-year term, can you answer these three questions?

• The ‘Exit’ Question: If your business doubles in size next year, can you move out or sublet without a massive penalty?

• The ‘Hidden’ Question: Are you paying for the landlord’s building capital improvements through your ‘outgoings’?

• The ‘End’ Question: Does ‘make good’ mean you have to strip the floorboards and repaint, or just leave it broom-clean?

Common Risks in Commercial Leasing

1. Unclear Lease Terms
   • Vague wording on rent increases, maintenance responsibilities, and renewal terms can lead to costly misunderstandings.
2. Hidden Costs & Outgoings
   • Expenses like property taxes, insurance, maintenance fees, and service charges can significantly impact profitability.
3. Limitations on Business Operations
   • Zoning restrictions, usage clauses, or limits on modifications may restrict business growth.
4. Unfavourable Rent Review Clauses
   1. CPI-based or market rent reviews can lead to unexpected rent hikes.
5. Make Good Obligations
   • Tenants may be required to restore the premises to its original state, leading to unexpected exit costs.
6. Personal Guarantees & Security Bonds
   • Landlords often require personal guarantees, putting business owners’ personal assets at risk.
7. Early Termination & Assignment Restrictions
   • Some leases make it difficult to assign the lease or exit early without heavy penalties.

Concerned about hidden lease risks? Our legal team can help ensure your lease protects your business. Get in touch today!

Key Lease Due Diligence Steps

✅ Review Lease Length & Renewal Terms: Ensure flexibility in case business circumstances change.
✅ Check for Hidden Costs: Clarify responsibilities for repairs, maintenance, and outgoings.
✅ Understand Make Good Obligations: Know what’s required at lease end to avoid unexpected expenses.
✅ Assess Exit Clauses & Break Rights: Look for fair termination and assignment terms.
✅ Seek Legal Review Before Signing: A legal professional can identify risks that may not be obvious.

Secure Your Business with a Professional Lease Review

Avoid costly lease mistakes by getting expert legal advice. Bennett Carroll Solicitors can review your lease, negotiate better terms, and protect your business interests. 📞 Contact us today for a commercial lease review and expert legal guidance.

Need Expert commercial Legal advice in Queensland?

At Bennett Carroll Solicitors, we provide expert legal assistance for business owners across Brisbane, Gold Coast, Sunshine Coast & Ipswich. Our experienced commercial lawyers in Queensland can guide you through contract negotiations, due diligence, financing, and settlement to ensure a smooth business purchase. 👉 Contact us today for a consultation or check out our other articles on commercial and business law .

Related Reads:

How to Buy a Business Series: Tips and Traps

Buying a Business? How to Conduct Proper Due Diligence to Protect Your Investment

Is Your Current Lawyer Truly Supporting Your Business Goals?

Navigating Business Structures: A Guide to Setting Up Your Business

Maximising Lease and Franchise Agreement Renewals: A Comprehensive Guide

Other external resources:

Buy an existing business- Business.gov

Buying a business- QLD Gov

Registering a business name – ASIC

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