In short: A tenant should settle the term and options, the rent review method, outgoings, make good and assignment before signing. For Victorian retail premises, the Retail Leases Act 2003 sets a 5-year minimum term and requires a disclosure statement.
Read the lease as an operator, not a landlord
Most commercial leases are drafted by the landlord's lawyer. They protect the landlord. Our job for a tenant is to find the clauses that will cost money in year three. Or the ones that block the sale of the business in year six. We read every lease against the same checklist. Here it is.
Term and options
The term is the fixed period. An option is the tenant's right to renew for a further term. Both matter for a business that will invest in fit-out. A short term with no option leaves the fit-out at the landlord's mercy. Options must be exercised within a window, usually by written notice months before expiry. Missing the date loses the option. We diarise every option date at signing. Under the Retail Leases Act 2003 (Vic), the landlord must remind a retail tenant of the option deadline in writing.
Rent review
Rent reviews come in three kinds: a fixed percentage, a consumer price index movement, or a market review. Fixed and CPI reviews are predictable. Market reviews can go up or down, and the lease sets who values and how disputes are resolved. A ratchet clause stops the rent falling on a market review. The Retail Leases Act bans ratchet clauses for retail premises and allows only one review method per review date. For non-retail leases they remain common, so we negotiate them out.
Outgoings
Outgoings are the landlord's costs passed to the tenant: council rates, water, insurance, management fees and building services. The lease should list them and state the tenant's share. For retail premises, the landlord must give an estimate of outgoings before the lease and a statement each year. Land tax cannot be recovered from a retail tenant in Victoria. Capital costs cannot be recovered either. For non-retail leases these protections do not apply, so the outgoings clause needs closer reading.
Make good
Make good is the tenant's obligation at the end of the lease. Some leases require the premises returned to a bare shell. Others require only repair of damage. The difference can be a large cost in the final month. We ask for a condition report at the start and a clear definition of the make good standard. We also seek a right to leave fit-out the landlord agrees to keep.
Assignment when you sell the business
A business with premises cannot be sold without the lease moving to the buyer. The assignment clause sets the landlord's consent process. The landlord may refuse consent on limited grounds, such as the buyer's financial standing. For retail premises, the tenant can be released from future liability on assignment. The tenant must first give the buyer a copy of the landlord's disclosure statement. Miss that step and the seller and its guarantors stay liable for the buyer's default. We tie this into the sale process in our note on selling a business.
Personal guarantees and security
Landlords ask directors of a tenant company to guarantee the lease personally. It should be capped in time or amount, and should end on assignment. A bank guarantee or security deposit is the other form of security. The lease should say when it is returned. For retail premises the Act sets a deadline for returning a security deposit after the lease ends.
The disclosure statement in outline
Where the Retail Leases Act applies, the landlord must give the tenant a disclosure statement before the lease is signed. A copy of the proposed lease must come with it. The statement sets out the rent, the outgoings estimate and the term. It also lists any relocation or demolition rights and works the landlord will do. If the statement is missing or late, the tenant may withhold rent until it arrives and, in some cases, terminate. If it is misleading, the tenant has remedies. The Act applies to most premises used mainly for selling goods or services to the public, subject to exclusions. We confirm whether it applies before advising on any other clause.
Before signing
Retail or non-retail: what changes
| Issue | Retail premises (Act applies) | Non-retail premises |
|---|---|---|
| Minimum term | 5 years including options, unless waived by certificate | Whatever is agreed |
| Disclosure statement | Required before signing | Not required |
| Ratchet clause | Void | Enforceable if agreed |
| Land tax recovery | Not allowed | Allowed if the lease says so |
| Capital costs | Not recoverable | Negotiable |
| Release on assignment | Available with disclosure to the buyer | Only if the lease provides |
Two clauses tenants overlook
Relocation and demolition
A landlord can reserve the right to move the tenant or end the lease for redevelopment. For retail premises the Act requires notice and compensation. For other leases the clause must be negotiated, or the fit-out investment is unprotected.
Permitted use
A narrow permitted use stops the business changing direction and makes assignment harder. We widen it at signing, when the landlord wants the tenant, rather than in year four.
How we help
Our commercial practice reviews leases for tenants on a fixed fee and negotiates the clauses above with the landlord's lawyer. Decide which entity signs before you sign. Our note on business structures explains why the tenant should usually be the trading company, not the founder. To send us a lease, contact us.
Frequently asked questions
Does the Retail Leases Act apply to my lease?
It applies to most premises used mainly for selling goods or services to the public, with exclusions. We confirm this first because it changes every other answer.
Can the landlord charge me land tax?
Not for retail premises in Victoria. For other commercial premises, only if the lease says so.
What is make good?
Your obligation to restore the premises when the lease ends. The standard should be defined in the lease, not left to the landlord.
Can I get out of a personal guarantee when I sell the business?
Only if the lease releases you on assignment. For retail premises the Act provides a release if you give the buyer the disclosure statement.
This article relies on the Retail Leases Act 2003 (Vic) and general contract law as applied in Victoria.
General information as at 2 September 2026. Not legal advice. Whether the Act applies, and what the lease means, turn on your own facts, so obtain advice before signing.