A commercial lease can be one of the largest fixed commitments a small business makes, and lease drafts are commonly prepared on the landlord’s behalf. Much of it is negotiable. The parts that are not are fixed by statute, and which statute applies is settled before you reach clause 1.
Queensland layers two sets of rules. A lease that is a retail shop lease carries a floor of minimum standards under the Retail Shop Leases Act 1994 (Qld): disclosure before signing, limits on rent reviews, controls on outgoings, and a low-cost dispute pathway. A lease provision purporting to exclude any of it is void, and where the Act and the lease conflict the Act prevails (ss 16, 17). Underneath that sit the general leasing rules in the Property Law Act 2023 (Qld), which reach commercial leases broadly rather than only the non-retail ones.
First, is it a retail shop lease?
A retail shop lease is a lease of a retail shop (s 5A(1)). A retail shop is premises situated in a retail shopping centre, or premises used wholly or predominantly for carrying on a retail business (s 5B). What counts as a retail business is prescribed by regulation (s 5C), and schedule 1 to the Retail Shop Leases Regulation 2016 (Qld) lists them by category, from cafes and hairdressing to dry cleaning, travel agencies and service stations (reg s 8).
Two exclusions catch people out. A shop with a floor area of more than 1,000 square metres is not a retail shop lease (s 5A(2)(a)). Nor are non-retail premises in a shopping centre where the retail area of that level, or of that single level building, is 25% or less of the total lettable area (s 5A(3)). On the Act’s own example, an accountant on level 4 of an otherwise-office centre sits outside the Act, while the cafe downstairs sits inside it.
| Issue | Retail shop lease | Other commercial lease |
| Disclosure before signing | Draft lease and disclosure statement, at least 7 days before | No equivalent statutory disclosure |
| Rent reviews | One a year, one basis, higher-of clauses void | As the lease provides, subject to unfair contract terms law |
| Outgoings | Capped by area share, with an annual estimate and an audited statement | As the lease provides, subject to unfair contract terms law |
| Disputes | Mediation, then QCAT | As the lease provides, then the courts |
Disclosure before signing
At least 7 days before a prospective tenant enters into a retail shop lease, the landlord must give a draft of the lease and a disclosure statement (s 21B(1)). The statement is not a formality. The regulation prescribes its contents, including the starting rent and how it is adjusted, the outgoings payable in the first year, fit-out works and any landlord contribution, and any demolition or relocation clause (reg s 2).
The 7 days can be shortened, but only by a signed waiver notice, and unless the tenant is a major lessee that waiver must come with a lawyer’s report confirming advice on what the waiver means (s 21B(2)).
If the landlord does not comply, or the statement is incomplete or false or misleading in a material particular, the tenant may terminate by written notice within 6 months of entering into the lease, and may recover compensation for loss (s 21F). One qualification is narrow: where the complaint is that the statement was defective, the tenant cannot terminate if the landlord acted honestly and reasonably and the tenant is in substantially as good a position regardless. That answer is not open to a landlord who gave no disclosure statement at all.
A prospective tenant who is not a major lessee, and is not a prospective franchisee, must also give the landlord a financial advice report and a legal advice report before entering into the lease (s 22D), and the regulation sets out what the legal advice must cover (reg s 7). You cannot be compelled to use, or pay for, a lawyer the landlord nominates (s 47).
Rent and how it moves
The lease must state when each review happens and the basis on which it is made (s 27(1)). Rent may not be reviewed more than once in any year of the lease, other than the first year, and each review must use a single basis: current market rent, an independently published index of prices, costs or wages, a fixed percentage of base rent, a fixed amount, the average rent paid over previous years where the rent includes a turnover percentage, or a combination of two or more of those bases other than current market rent (s 27(2) to (5)).
This is where many draft leases fail. A clause reserving a discretion to pick between two calculation methods on a given review, or fixing the rent at whichever of two methods produces the higher result, is void (s 36). The familiar “greater of CPI or 4%” therefore does not hold in a retail shop lease, unless the tenant is a major lessee who gave the landlord written notice before signing that the rent review rules do not apply (ss 27(8), 36(2)). In any other commercial lease there is no equivalent control in the retail legislation, so the clause deserves a harder look in an office lease, not a softer one, and for a small business tenant the unfair contract terms rules below may still reach it.
Outgoings and other contributions
A tenant is not liable to pay outgoings at all unless the lease specifies which outgoings are payable, how they are determined and apportioned, and how the landlord may recover them (s 37(1)). A bare covenant to pay “all outgoings” does not do the work.
Where the lease does specify them, the tenant’s share of the landlord’s apportionable outgoings cannot exceed the proportion the shop’s area bears to the total area of the landlord’s premises that enjoy or share the benefit of that outgoing, counting premises available for lease as well as those actually let (s 38(1)). The landlord must give an annual estimate at least a month before the period it covers, itemised so no single line exceeds 5% of the total, unless the item is a charge, levy, rate or tax payable under an Act or cannot be itemised any further (s 38A). An audited statement prepared by a registered auditor follows within 3 months of the period ending, comparing what was estimated against what was actually spent (s 38B). Both obligations arise under the Act, so a lease that says nothing about them does not displace them.
Where there is a sinking fund, contributions from all tenants in a year cannot exceed 5% of estimated outgoings, and the fund cannot be built past $100,000, the cap set by the Act as at September 2026 (s 40).
Fit-out, make good and security
Make good is where the money goes at the end, and the retail legislation does not regulate it. It turns on the lease and the general law. Read the make-good clause against the fit-out clause and ask three things: what condition is the benchmark, whether you must strip out works the landlord required you to install, and whether the obligation is to reinstate or to pay a sum instead. Photograph the premises the day you take possession.
A bank guarantee ties up working capital for the whole term, so check the amount, what triggers a call on it, and how long after the lease ends it is held. Directors are routinely asked to sign as guarantors, and a guarantor’s exposure does not always end when the business is sold.
Options, assignment and who pays the costs
An option is worth only what its timing allows. The landlord must give written notice of the option date at least 2 months, and not more than 6 months, before it (s 46). Once the option is exercised, the landlord must give a current disclosure statement within 7 days, unless the tenant waived that when exercising, and the tenant then has 14 days from receiving it to withdraw the exercise notice, for any reason or none (s 21E).
On the way out, disclosure runs between assignor and assignee as well (s 22B), and it does real work. Where the assignor complied with those requirements, which include giving the landlord a copy of the statement on the day consent is sought, and the statement was not defective, the assignor and any guarantor of the assignor are released, on the assignment being entered into, from liability for the assignee’s default (s 50A). Sell the business without attending to that and you can stay exposed for the balance of the term.
On costs, a tenant under a retail shop lease is not liable for the landlord’s legal or other expenses of preparing, renewing or extending the lease, of obtaining a mortgagee’s consent, or of complying with the Act (s 48). Survey and registration fees are the exception, along with the cost of a final lease the tenant asked to have prepared and then did not sign.
Relocation, demolition and disturbance
If the lease lets the landlord relocate the business, the relocation notice must set out a genuine refurbishment, redevelopment or extension proposal that cannot practicably proceed with the tenant in place, identify a reasonably comparable alternative shop, which must be inside the same centre where the leased shop is in one, and give at least 3 months before the move (s 46D). If the lease lets the landlord terminate for demolition, the notice must show a genuine proposal and give at least 6 months (s 46I). Both sets of requirements are read into a lease containing such a clause.
Compensation is also implied for business disturbance: substantially restricted access, significant disruption to trading, plant left unrepaired, or being made to vacate early for redevelopment (s 43). The tenant must give written notice of the loss as soon as practicable, and while a failure to do so does not extinguish the claim, it is taken into account in fixing the amount. Compensation does not extend to a reasonable response to an emergency, or to action taken in compliance with a duty imposed under an Act.
When the Act does not apply
Outside the retail regime the lease is close to the whole story, but not quite. Part 9 division 5 of the Property Law Act 2023 (Qld) applies despite any agreement to the contrary (s 151), though for a lease of not more than 1 year it reaches only an option to renew or an option to purchase the reversion (s 150). The rule that matters most is that a landlord may exercise a right of re-entry for breach only after giving a notice to remedy breach in the approved form, stating the nature and extent of the breach, that the landlord intends to terminate if it is not put right, and, where the breach can be remedied, a reasonable period to remedy it (s 153). The exception is where the landlord reasonably believes the tenant has given up possession (s 156).
A tenant, and also a mortgagee, a subtenant or a guarantor, may apply to the court for relief against forfeiture (s 160). They replaced equivalents in the repealed Property Law Act 1974 (Qld), so a precedent lease drafted around the old numbering is worth a second look.
Unfair contract terms
One Commonwealth control reaches many commercial leases and is easy to miss. The unfair contract terms provisions of the Australian Consumer Law apply to a standard form small business contract, and the definition expressly covers the sale or grant of an interest in land, which is what a lease is. A contract qualifies if at least one party employs fewer than 100 people or turned over less than $10 million in its last income year (s 23(4)).
A term is unfair if it would cause a significant imbalance in the parties’ rights, is not reasonably necessary to protect the legitimate interests of the party it favours, and would cause detriment if applied or relied on (s 24(1)). Two presumptions run in the tenant’s favour. A contract alleged to be standard form is presumed to be one unless the other party proves otherwise (s 27(1)), and a term is presumed not reasonably necessary unless the party it advantages proves it is (s 24(4)). An unfair term is void and the lease continues without it, and proposing such a term, or relying on one, is itself a contravention carrying a court penalty (s 23(1), (2), (2A), (2C)).
For a small business tenant handed a landlord’s standard lease, this is the main statutory protection outside the retail regime, and it is worth raising before signing rather than after a dispute.
Published 9 September 2026.
Where this leaves you
How much protection a commercial lease carries turns on whether it is a retail shop lease and on what the parties actually wrote. The second is negotiable, and the window closes on signing. The clauses that cause the most trouble years later, make good, the review basis and the outgoings definition, look most like boilerplate on a first read.
Fraser Lawyers acts for tenants and landlords on commercial law matters, including lease review and negotiation and the drafting of business contracts.
Related reading
- When does your business actually need a lawyer to review a contract?
- How Fraser Lawyers helps with commercial disputes
- Contact Fraser Lawyers
Need advice? A lease commits a business for years, and the terms are settled on the day it is signed. If you have one in front of you, contact Fraser Lawyers to understand what it requires and where you stand, with no obligation. |
This article is general information only and is not legal advice. Queensland law and the figures referred to can change, and every situation turns on its own facts. Contact Fraser Lawyers for advice specific to your circumstances.
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