Why the Distinction Matters
If you're a landlord in Australia, it’s crucial to understand that not all leases are created equal. While residential leases are more common, commercial leasing operates under a very different legal and regulatory framework—with greater flexibility, but also higher risk if handled incorrectly.
In this post, we’ll break down the key legal differences between commercial and residential leasing from a landlord’s perspective, covering everything from legislation and lease terms to rights, obligations, and dispute resolution.
Whether you're new to leasing or looking to expand your investment portfolio, this guide will help you avoid costly mistakes and stay compliant.
Want to dive deeper? Keep reading for what every landlord should know before drafting or signing a lease.
Residential leases are tightly regulated under each state’s tenancy laws, such as the Residential Tenancies Act 2010 (NSW) or Residential Tenancies Act 1997 (VIC). These laws protect tenants from unfair treatment and restrict how much control landlords have over the lease terms.
Commercial leases, on the other hand, are largely governed by the Retail Leases Act (for retail spaces) and the principles of contract law. Outside retail, many commercial leases fall under common law and equity, which offer far more leeway for negotiation.
Pro Tip: As a landlord, you have more control over rent increases, responsibilities, and lease clauses in commercial leasing—but you also have less protection from legal missteps.
Residential lease agreements are mostly predefined—government-approved forms with limited room for change. Terms such as bond amount, termination notice, and property standards are non-negotiable.
Commercial leases are bespoke contracts. Everything from the rent structure to fit-out responsibilities can be negotiated and tailored to suit the business’s operations.
Key differences landlords should note:
Did You Know? Landlords must provide a Disclosure Statement before finalising most retail leases. Failing to do so could invalidate key parts of the agreement.
In residential tenancies, landlords are required to:
In contrast, commercial landlords can:
However, the trade-off is:
Important: In retail leases, some protections (e.g. rent disclosure, minimum lease periods) still apply, depending on the jurisdiction.
Residential disputes typically go to a tribunal (e.g. NCAT in NSW or VCAT in Victoria). These tribunals are designed for accessible, low-cost resolution.
Commercial disputes often escalate to:
Furthermore, eviction for commercial tenants usually requires strict adherence to contractual default clauses, while residential evictions must follow legislated notice periods and tribunal approval.
Pro Tip: Always ensure your commercial lease clearly defines breach consequences and termination procedures to protect your interests if the tenant fails to pay or damages the property.
If you're a landlord considering the move from residential to commercial leasing, here’s what to realistically expect:
1. Use a Lawyer to Draft the Lease: Don’t rely on templates. A custom lease protects your interests and reduces the chance of future disputes.
2. Conduct Due Diligence on the Tenant: Check ABN, financials, credit history, and trading history before signing.
3. Require a Personal Guarantee: This ensures that if the business folds, the individual behind it is still liable for unpaid rent or damages.
4. Regular Rent Reviews & Maintenance Clauses: Ensure the lease includes built-in rent increases and defines maintenance responsibilities clearly.
By treating your lease like a business partnership and having strong legal protections from the start, you minimise risk and maximise long-term return—without the regulatory headaches of residential tenancies.
Not anytime—but more frequently than residential leases. It depends on what the lease agreement says. Most include CPI-based or annual increases.
Yes, but the rules are less strict. There's no mandated amount or holding authority. Landlords may ask for a bank guarantee instead.
Only if the lease allows it. Your lease should include a default clause with notice periods and the right to terminate if the tenant breaches.
Yes. Retail leases have more tenant protections under state-specific Retail Leases Acts. They require disclosure statements and sometimes limit what landlords can charge.
Residential and commercial leasing serve different purposes and operate under distinct legal frameworks. While commercial leases offer greater flexibility and potential for return, they also demand more attention to detail and risk mitigation.
As a landlord, understanding the legal differences isn’t just helpful—it’s essential to protecting your investment.
Whether you're drafting a new lease, reviewing an existing one, or facing a dispute, don’t go it alone. A qualified property lawyer can help you navigate your rights and obligations with confidence.