How to Avoid Commercial Lease Traps in a Tenant’s Market

Commercial tenants are negotiating lease terms earlier than ever — and landlords are saying yes. Why? Because we’re in a rare leasing environment: one that gives tenants the upper hand. But with opportunity comes risk. In our latest episode of Explain That, commercial lease lawyer and property law specialist Brad Marland breaks down the fine print that causes the biggest regrets and how business owners and their advisors can avoid them.

A Quiet Shift in Power: Tenants Are Renegotiating Early

Until recently, negotiating commercial real estate lease agreements mid-term was virtually unheard of. That’s changed.

“I’ve seen tenants renegotiate as early as year two in a five-year lease — it’s a trend I’ve never seen in 20+ years of practice.” — Brad Marland

Landlords are increasingly agreeing to early renegotiation in exchange for longer commitments, offering reduced rent periods or rent-free incentives. For tenants, this is an opportunity to lock in more favourable terms early — but only if they act proactively.

The Clauses That Can End a Business

Most lease regrets come down to a handful of poorly drafted clauses. Brad identified four that regularly cause issues:

1. Indemnities: If the lease doesn’t carve out the landlord’s own negligence, your client could be liable — even when the landlord is at fault.

2. Make Good Clause: Ambiguity around restoration obligations can leave tenants footing the bill for unnecessary (or unreasonable) works that is why a make good clause in commercial lease is one of the issues that need to be clear and concise.‍‍

3. Maintenance Obligations: Who’s responsible for aircon and plumbing? If it’s not clearly the landlord, tenants could face massive unexpected costs.

4. Outgoings: Shockingly, some leases still include the tenant funding the landlord’s:‍‍

• Structural repairs
• Capital works
• Income tax
• Financing costs
• Depreciation

These risks can often be avoided atthe heads of agreement stage — well before the lease is finalised.

Heads of Agreement — The Real Battleground

Many business owners assume the real negotiations happen once the formal lease is drafted. Not true.

“Most of the damage is done in the heads of agreement. And most tenants don’t have their lawyer involved at that point.” — Brad Marland

If you’re a professional advisor, this is where you can help your client avoid irreversible errors. If you’re a business owner, engaging legal advice early could save you tens of thousands in fit-out, relocation, or repair costs later on.

Make Market Rent Reviews Work for You

Rent review clauses are a key part of commercial leasing, but they’re often misunderstood. If not carefully negotiated, they can leave tenants locked into above-market rates for years.

“Even with a five-year lease, I negotiated a market rent review after two years. Just make sure the clause allows the rent to go down—some clauses lock it so the rent can’t be lower than the previous year.” — Brad Marland

When it comes to rent reviews in commercial leasing terms, the fine print matters. Make sure the clause works both ways—not just in the landlord’s favour.

A Commercial Approach to Commercial Leases

Legal support should never get in the way of doing business. As an experienced commercial lease lawyer, Brad’s approach — and the broader Velocity Legal philosophy — is to:

• Identify legal risks that actually matter
• Avoid dragging out negotiations
• Help clients move forward confidently, not get bogged down in technicalities

Whether we’re acting for a tenant or a landlord, the goal is simple: protect our client’s interests and help them move on with business.

Want to Go Deeper? Join Our Upcoming Breakfast Seminar

We’ll be covering this topic in greater depth at our upcoming seminar, including:

• Case studies of lease negotiations gone wrong (and how to fix them)
• How to draft practical, protective heads of agreement clauses
• What’s changing in the market and how to help your clients get ahead

Event Date: 15 May 2025 (Thursday)
Location: North Tower, Level 6/80 Collins St, Melbourne VIC 3000
Book now: Commercial Leasing: Hidden Clauses That Landlords (and Tenants) Often Regret‍

If you or your client is about to sign a commercial lease — or you’re wondering if now’s the right time to renegotiate — reach out to our team. We’re here to help you move forward, not slow you down.

‍‍

Contact us | Listen to the episode | Register for the seminar

‍