What Unfair Terms Should Tenants Watch for in Commercial Leases?
Why Do Unfair Terms Occur in Commercial Leases?
Unfair terms in commercial leases are common, as commercial leases often favour landlords—especially when tenants sign standard lease templates without negotiation. While commercial leases are not governed by the same unfair contract laws as consumer contracts, small businesses may still have protections depending on the contract size and circumstances.
Understanding the terms before signing helps tenants avoid unexpected costs and disputes.
Which Lease Terms Are Commonly Problematic?
Certain clauses raise concerns for small business tenants, including:
- Automatic rent increases without clear formulae
- Extensive make-good obligations requiring expensive reinstatement
- Outgoings that are unclear or unlimited
- Restrictions on assigning or subletting
- Personal guarantees that expose directors to risk
These terms aren’t always unlawful, but tenants should understand the cost and legal implications.
How Do Rent Review Clauses Work?
Common review mechanisms include fixed percentages, CPI increases, or market reviews.
Problems occur where:
- The formula is vague
- Landlords have unilateral discretion
- Mid-term “ratchet clauses” prevent rent reduction after a market review
Clear, transparent rent review clauses reduce uncertainty.
What About Make-Good and Fit-Out Requirements?
Make-good clauses can require tenants to restore the premises to its original condition, even if the premises was already worn when the lease commenced.
Tenants should:
- Document the starting condition
- Negotiate reasonable and proportionate obligations
- Understand end-of-lease costs before signing
Why Should Tenants Seek Legal Advice?
A commercial lawyer can help review the lease, negotiate fairer terms, and identify hidden risks.
For assistance reviewing or negotiating your commercial lease, contact Gladwin Legal.