The 5 Biggest Lease Mistakes We Are Seeing Commercial Tenants Make in 2026
A commercial lease is often one of the most significant financial commitments a business will make.
Yet we are still seeing tenants commit to premises without properly understanding the legal and commercial consequences.
Sometimes that starts with a handshake arrangement.
Other times, it starts with a Heads of Agreement or Offer to Lease that is signed quickly because it is treated as a formality.
It is not always a formality.
At Bird Law, we cannot stress enough the importance of properly negotiating the key commercial terms before entering into a binding lease.
In many cases, the Heads of Agreement sets the framework for the lease that follows. If unfavourable terms are agreed at that stage, it can be difficult to renegotiate them later.
The issues we are seeing most often include:
1. Make good obligations
Tenants often focus on rent and incentives, but do not always consider what they must do at the end of the lease.
A broad make good clause can require a tenant to remove fitout, reinstate the premises and return the premises to a condition that may be very different from how they received it.
That exit cost can be significant.
2. Default and termination rights
We are seeing leases where even a relatively minor breach may give the landlord a right to terminate or re-enter the premises, sometimes without any meaningful notice period.
A late payment caused by oversight or a minor technical breach should not usually result in immediate termination.
Where possible, we recommend that default provisions include reasonable notice and an opportunity for the tenant to remedy the breach before the landlord can terminate or re-enter.
3. Incentive clawbacks
Incentive clawback provisions also need careful attention.
Some leases allow the landlord to claw back incentives if the lease is assigned, even where the assignment is to a related entity within the same corporate group.
That can be a surprising outcome for tenants who are simply restructuring, changing operating entities or transferring the lease internally.
Sensible carve-outs should be considered where the assignment does not materially change the risk profile for the landlord.
4. Personal guarantees
For many small and medium-sized businesses, landlords require directors or related parties to provide personal guarantees.
This can expose individuals personally if the tenant defaults.
Where possible, tenants should consider negotiating for a bank guarantee or security deposit to be provided instead of a personal guarantee.
This may give the landlord appropriate security while avoiding unnecessary personal exposure for directors and business owners.
5. Relocation and redevelopment rights
Some leases allow landlords to relocate a tenant or terminate the lease for redevelopment.
These clauses can significantly affect a business, particularly where location, customer traffic or fitout investment are important.
The key question is whether the tenant has adequate protections if those rights are exercised.
Final thoughts
The best time to negotiate lease protections is before anything is signed.
Once a tenant has agreed to a handshake arrangement, signed an unfavourable Heads of Agreement or accepted a landlord’s key terms, they may have already given away much of their negotiating leverage.
A well-negotiated Heads of Agreement or Offer to Lease does more than protect a tenant’s position. It also creates a clearer framework for the lease that follows.
In our experience, the more thoroughly the commercial deal is negotiated and documented upfront, the faster and more cost-effectively the lease itself can usually be prepared and finalised. Conversely, where key issues have not been addressed early, lease negotiations often become longer, more expensive and more contentious.
Getting advice early, particularly before signing a Heads of Agreement or Offer to Lease, is often far cheaper than trying to fix the problem later.
Authored by Daniel Jeffery, Special Counsel at Bird Law.
