Quick answer
Before signing a retail lease for a shop, café or restaurant, check the term and options, how and when rent is reviewed, which outgoings you pay, the security required, any rent-free fit-out period, what alterations need consent, make-good obligations, permitted use, assignment rights and personal guarantees. Retail leases are governed by state laws, and each state has a small business commissioner or similar body offering guidance.
Key points
- Retail leases are covered by state and territory legislation, which differs.
- Term and options should be long enough to recover your fit-out.
- Outgoings, rent reviews and make-good can matter as much as the headline rent.
- Get legal advice before signing; it costs far less than a bad lease.
Finding the right shopfront feels like the hard part. Then the lease arrives: forty pages of clauses about outgoings, reviews, make-good, assignment and guarantees. It’s tempting to skim it, especially when the agent says it’s “standard”. But for a café, restaurant or shop, the lease decides your rent for years, how much your fit-out is really worth and what it will cost to leave. This checklist covers the terms that matter most, so you know what to ask before you sign.
Which laws apply to your lease?
Retail leases in Australia are covered by state and territory legislation, not a single national law. In Victoria, for example, the Retail Leases Act 2003 applies, and the Victorian Small Business Commission offers guidance, free preliminary assistance and low-cost mediation for disputes. Other states have their own legislation and small business commissioners or similar bodies. Whether your premises count as “retail premises” under your state’s law depends on the use and sometimes the size or rent of the tenancy, so check early.
The checklist
1. Term and options
- How long is the initial term?
- Are there options to renew, and on what conditions?
- Is the total term long enough to recover your fit-out investment?
A café or restaurant with a significant fit-out needs enough years to earn it back. A short term with no options leaves you exposed.
2. Rent and rent reviews
- What is the starting rent, and is it plus GST?
- How and when is it reviewed: fixed increases, a CPI-based formula, or market reviews?
- What happens at the start of an option term?
Model the rent over the whole term, not just year one. Our seasonal trade planner helps you test whether your trading pattern can carry it through quiet months.
3. Outgoings
- Which outgoings do you pay: council rates, water, insurance, cleaning, centre marketing, management fees?
- How are they calculated and apportioned?
- What estimates are you given, and how are they reconciled?
Outgoings can add significantly to the headline rent, especially in shopping centres. The Victorian Small Business Commission publishes guidance on which expenses landlords can pass on to tenants in Victoria; other states have similar rules.
4. Disclosure
- Have you received the landlord’s disclosure statement, and when?
- Does it match the lease?
States set rules about when a landlord must provide a disclosure statement and what it must contain. Compare it carefully with the lease itself.
5. Security
- How much bond or bank guarantee is required?
- Can it be reduced after a period of good payment history?
- How and when will it be returned?
In Victoria, the Small Business Commission says the amount isn’t regulated and should be negotiated, that security can take the form of a bank guarantee, and that the landlord must return it within 30 days of the lease ending if the tenant has met their obligations. Our page on lease bonds and bank guarantees explains the funding side.
6. Fit-out and rent-free period
- Is there a rent-free period for your fit-out?
- Will the landlord contribute to base services or works?
- What approvals do you need from the landlord for your design?
A rent-free fit-out period can save a new café or restaurant a significant amount. Ask for it before you sign, not after. See restaurant fit-out finance and shop fit-out finance for budgeting the works.
7. Repairs and maintenance
- Who is responsible for the structure, plant and equipment?
- Who maintains air-conditioning, grease traps and exhaust systems?
In Victoria, the Small Business Commission says landlords must maintain the structure and the plant and equipment in their original condition, while tenants must keep the premises clean and in good order, subject to fair wear and tear. Other states have their own rules, and your lease may add detail.
8. Permitted use
- Does the permitted use clause cover everything you plan to do: cooking, liquor, takeaway, extended hours?
- Are there restrictions to protect other tenants?
A café lease that doesn’t allow cooking or a shop lease that excludes a product you plan to sell can be a costly surprise.
9. Make-good
- What must you remove or restore when the lease ends?
- Does it include removing the landlord’s original fit-out or the previous tenant’s?
Make-good can be expensive, especially for hospitality venues with kitchens and extraction. Clarify it in writing.
10. Assignment and subletting
- Can you assign the lease if you sell the business, and on what conditions?
- What costs will the landlord charge for an assignment?
If you might sell one day, a workable assignment clause protects the value of your business. See buying a café or restaurant for the buyer’s side.
11. Personal guarantees
- Are directors required to guarantee the lease personally?
- For how long, and does the guarantee end on assignment?
12. Trading hours and centre rules
- Are there required trading hours (common in shopping centres)?
- Are there restrictions on signage, music, deliveries or outdoor seating?
Before you sign: get advice
A lawyer experienced in retail leasing can review the lease, flag unusual clauses and negotiate changes. It’s a modest cost against a commitment that may run for many years. Your accountant can check the rent and outgoings against your forecasts. If the lease requires a large bond or a big fit-out, it’s also worth understanding your funding before you commit, so you can check what you could qualify for without a credit check at the first step.
Questions to ask the landlord or agent
Beyond the written lease, a few direct questions can tell you a lot:
- Why did the previous tenant leave?
- How long has the space been vacant?
- Are any works planned for the building or centre that could disrupt trade?
- What are neighbouring tenants paying, roughly, and how long have they been there?
- Is there flexibility on the rent-free period, the bond or the review mechanism?
- Who handles maintenance requests, and how quickly are they usually resolved?
The answers help you judge not just the premises but the landlord you’ll be dealing with for years. A landlord who is responsive and reasonable at the negotiation stage is usually easier to work with once you’ve moved in.
A quick comparison table
| Term | Tenant-friendly | Watch out for |
|---|---|---|
| Term and options | Long enough to recover fit-out | Short term, no options |
| Rent reviews | Fixed, predictable increases | Uncapped market reviews |
| Outgoings | Clear, capped or estimated | Open-ended recoveries |
| Security | Negotiated, reducing over time | Large, fixed for the whole term |
| Fit-out | Rent-free period, landlord contribution | Rent starting at handover |
| Make-good | Clearly defined, limited | Full strip-out to bare shell |
| Assignment | Reasonable consent process | Broad landlord discretion |
An illustrative example
Illustrative only. A florist finds a larger shop on a busy strip. The draft lease has a short initial term, market rent reviews and a make-good clause requiring a full strip-out. With her lawyer, she negotiates an option to extend, fixed annual increases, a short rent-free period for the fit-out and a make-good limited to her own works. The bond stays at several months’ rent, which she includes in her opening budget alongside a flower cool room and counter.
Sign with confidence, and with funding sorted
A good lease makes every other part of your business easier to plan. Once the terms are right, the next question is usually how to fund the bond, the fit-out and the first months of trading. When you’re ready, tell us about your new premises in a short enquiry. It takes about 60 seconds and there’s no credit check when you first enquire. We won’t pass your details to a string of lenders; one real person who understands shops and venues looks at your plans and calls you with options that fit. Please fill in the form accurately, including the total you need and any property you own, so we can match you properly the first time. Planning a second location? See opening a second shop or venue.
Frequently asked questions
What laws cover retail leases in Australia?
Each state and territory has its own retail lease legislation. In Victoria, for example, the Retail Leases Act 2003 applies and the Victorian Small Business Commission provides guidance and dispute help. Other states have their own acts and small business commissioners.
What is a disclosure statement?
It's a document a landlord provides to a prospective retail tenant setting out key information about the lease and premises, such as rent, outgoings and the lease term. States set their own rules about when it must be provided and what it contains.
How much bond will a landlord ask for?
It varies and is negotiated. In Victoria, the Small Business Commission notes the amount isn't regulated by retail leases legislation, that a security deposit can be a bank guarantee, and that it must be returned within 30 days of the lease ending if the tenant has met their obligations.
What is make-good?
Make-good is your obligation at the end of a lease to return the premises to a specified condition, which can mean removing your fit-out. Clarify exactly what's required before you sign, because it can be expensive.
Can I transfer my lease if I sell my café or shop?
Usually through assignment, which generally needs the landlord's consent under conditions set by the lease and state law. Check the assignment clause before signing, especially if you might sell the business one day.
Do I need a lawyer to review my lease?
It's strongly recommended. A lease is a long, expensive commitment, and a lawyer experienced in retail leasing can spot issues that cost far more than their fee.