Commercial Leases: Terms Landlords Get Wrong

Commercial tenancies run for years on terms agreed in an afternoon. The clauses that matter and the ones that are missed.

A commercial lease governs a relationship lasting years, with obligations flowing in both directions. Landlords new to commercial property often apply residential habits, and the differences surface when something goes wrong.

Why these keep happening

The pattern is treating a commercial lease as a rent agreement rather than as a contract allocating responsibility for a building over time. The rent is the part everyone negotiates; the allocation is what determines the outcome.

1. No clarity on repair and maintenance responsibility

Both parties assume the other handles it, and raising it feels like negotiating against yourself.

• Avoid it by: Allocate responsibility explicitly by element: structure, systems, interior finishes and external areas.
• Proof it is closed: A schedule of responsibilities annexed to the lease.

What it costs you: Building systems deteriorate while responsibility is disputed, and the deterioration becomes the landlord's problem eventually.

2. No condition record at the start

The unit is handed over and the tenant begins fit-out immediately.

• Avoid it by: Produce a photographic schedule of condition signed by both parties before fit-out.
• Proof it is closed: A dated, signed condition schedule.

What it costs you: At lease end, the condition the tenant must restore is disputed because nobody recorded the starting point.

3. Uncontrolled tenant alterations

Fit-out is expected and the tenant is investing in the space.

• Avoid it by: Require approval of fit-out drawings and state what must be removed or may remain at the end.
• Proof it is closed: Approved fit-out drawings and a written reinstatement position.

What it costs you: Alterations affect building systems, compliance or structure, and removal at lease end becomes contentious.

4. No rent review mechanism

A long lease at a good rent feels secure at signing.

• Avoid it by: Include a defined review mechanism with dates and a clear basis.
• Proof it is closed: A review clause with dates, basis and a process if the parties disagree.

What it costs you: Rent stays fixed while the market moves, and the asset underperforms for years with no mechanism to correct it.

5. Weak provisions on use and assignment

The tenant's intended use is known and assignment seems unlikely.

• Avoid it by: Define the permitted use and require consent for assignment, with criteria stated.
• Proof it is closed: Use and assignment clauses with defined limits.

What it costs you: The use changes to something that affects the building or other tenants, or the lease is assigned to a weaker party.

6. Inadequate security for the obligations

The tenant appears established and the relationship begins positively.

• Avoid it by: Take appropriate security proportionate to the term and the tenant's standing.
• Proof it is closed: Security arrangements documented and, where applicable, verified.

What it costs you: If the business fails, the remaining term and any damage are unsecured, and recovery is difficult.

A short check before you sign

• Is repair responsibility allocated by element in writing?
• Does a signed condition record exist from before fit-out?
• Are alterations approved and is reinstatement addressed?
• Is there a rent review mechanism with dates and a basis?
• Is security proportionate to the term and the tenant?

If it has already happened

If a lease is already running with these gaps, address the condition record first, since it becomes more difficult with every month that passes. A documented record agreed now, even mid-term, is considerably better than reconstructing the original condition from memory at lease end.

If you are buying, selling or investing, Domira can verify the documents, assess the property and build the numbers with you before you commit to a transaction.