What Are The Legal Obligations Of A Landlord In A Commercial Lease?

When you own a commercial property and you are the Landlord, you have a number of obligations you must meet. These obligations are drafted in a Commercial Lease, which outlines the rights and responsibilities between a commercial Landlord and the party who wishes to occupy the property.

It is vital that your Commercial Lease is drafted correctly from the start to avoid a potential conflict later on. When you engage the services of a competent and experienced legal professional you can be sure that your terms and conditions will suit and protect both parties.

This is a short guide on your legal obligations as a commercial Landlord, and some information about the common responsibilities and rights which need to be included in your Lease. Avoid conflict tomorrow and put a comprehensive Commercial Lease in place today.

If you would like to get some more information about putting together a Commercial Lease, or to speak to a professional Commercial Lease Lawyer in Melbourne, please call us today on 03 9878 5222.

The main responsibilities of a commercial Landlord

As a commercial Landlord you have a number of responsibilities to ensure your building is up to a certain standard and to make sure that your property does what the Lease says it is going to do. You also need to be aware of the type of business or industry your prospective Tenant is going to undertake in the premises and to make sure that this does not create a general nuisance.

  • Your rates and/or owner corporation fees have to be up to date when your new Lease is signed.
  • The property must suit the purposes of your Tenant. That is, if your Tenant has heavy or vibrating equipment as a normal part of their business, your premises need to handle the weight of the vibrations and any other disturbance.
  • If your Tenant has an industrial business where there is a lot of noise or air pollution you need to ensure that this does not impact on the local area.

If you are looking to Lease a property to a new Tenant and would like advice and guidance on how to draft your Commercial Lease, our commercial lawyers Melbourne can help you.

commercial lease agreement with landlord

How to minimise risks with your Commercial Lease

It is up to you to make sure you protect yourself with a comprehensive Commercial Lease that outlines all of the duties and responsibilities of both parties. You have certain rights, as does your Tenant. You can minimise risks to both parties by including key elements in your Commercial Lease. Make sure you have the following key terms and conditions outlined in your Lease:

  • It is the responsibility of the Tenant to maintain the building and the grounds around the building.
  • The Landlord is responsible for paying rates and/or body corporate fees. It is preferable that sufficient rent is charged by the Landlord so that the Landlord will make these payments without deficit.
  • The Landlord is responsible for insurance on the property, and again the Landlord should arrange that the rental incorporates a figure for insurance.
  • The Landlord to require the Tenant to insure their own fittings and have appropriate public liability insurance.
  • The Landlord must obtain an appropriate Bond for at least three months of rental.
  • There must be terms and conditions outlined, as well as a method for regular payment of rent at a specific time each month, quarter or year.
  • Regular inspections need to be performed on the premises to ensure that they remain in a good state of repair.
  • Premises must contain appropriate fire safety equipment and it is the Landlord’s responsibility for ensuring this.

Key differences between retail and non-retail Commercial Leases

There are differences between a Lease which is retail and that which is a non-retail Commercial Lease. Retail Commercial Leases are regulated by the Retail Leases Act and occur where property is used to sell goods or provide services to another party. A non-retail Commercial Lease usually applies to warehouses, offices or industrial sites. The basic distinction is the sale of goods to the public. There are key differences in the responsibilities for the commercial Landlord and the Tenant at each type of Lease.

Commercial Lease Retail Lease
  • Each party usually has to pay their own fees for the preparation of a Commercial Lease
  • Lease provisions are largely open to negotiation in many cases, unlike Retail Leases
  • Landlord must provide a Disclosure Statement before a Retail Lease is signed
  • New Disclosure Statement must be provided by Landlord whenever the Retail Lease option is exercised, or there is an agreement to amend the Lease
  • Disclosure Statement provided by the Tenant when the Retail Lease is to be transferred to a third party
  • Land tax payable by the Landlord in retail Leases

As there is a wide definition of what is considered a Retail Lease, the Landlord must determine whether the premises are retail or commercial. At first instance, the premises may not seem to be retail, however if the customers of the Tenant are retailers dealing with the public then the Landlord must know about this fact and treat the premises as retail premises.

Recent decisions in the Courts have also muddied the waters between what is a retail lease and what is not, so it is best to obtain proper legal advice to ensure that you have the right type of Lease.

small business owner in commercial lease

Get advice on your Commercial Lease today

Our business lawyers in Melbourne have a great deal of experience in working with commercial Landlords and drafting Leases. Ensure you understand your rights and obligations, and draft a Commercial Lease that favours both you and your Tenant. Contact us today for a discussion about how we can help on 03 9878 5222.