What Is Leasing? A Legal Guide for Australian Businesses (Queensland Edition)

Leasing is a key strategic tool for many businesses in Australia - allowing you to access premises or equipment without the upfront cost of purchase. However, the legal landscape that governs leases is complex and varies across states. This guide focuses on what leasing means for businesses in Queensland, Australia, covering the essentials from definition through to termination and reform. We also provide practical tips and highlight where you should seek legal help.

1. What Is Leasing? The Basic Definition

In the business context, leasing describes a contractual arrangement where:

• a lessor (e.g., a property owner or equipment supplier) grants a lessee (your business) the right to use an asset (premises, equipment, vehicles) for a defined period;
• in exchange the lessee pays regular lease payments (rent or lease fees);
  ownership of the asset remains with the lessor (unless the lease expressly provides a purchase option).   

Essentially, “Leasing is a legal arrangement where one party (the lessee) gets the right to use an asset owned by another party (the lessor) for a specified period—in exchange for regular payments.” 

In practice for businesses this often means leasing:

• commercial premises (offices, warehousing, retail shops)
• specialist equipment or vehicles (machinery, vehicles, technology)
• sub-leasing or assignment of leases when businesses change.
  

Why this matters: leasing helps preserve capital, increase flexibility, and can provide tax advantages. But like all contracts, leases bring obligations—and risks—especially when you’re locked into long-term commitments.

2. Why Businesses Lease (Rather than Buy)

From a strategic business perspective, leasing offers several advantages:

Reduced capital expenditure: You avoid the large upfront cost of purchase and instead pay over time.
Flexibility: If your business expands, shifts direction or relocates, leasing can offer greater agility compared with owning.
Maintenance and upgrades: Especially for equipment leases, the lessor may take on maintenance responsibility (depending on the contract).
Tax and finance structuring: Lease payments might be deductible as a business expense depending on your tax structure (always check with your accountant).
Preserves borrowing capacity: By not tying up funds in property/equipment purchase, the business may retain borrowing capacity or working capital flexibility.

However, leasing is not always the best route - poorly drafted leases, inflexible terms, “make good” obligations (restoring premises to original condition), and unexpected outgoings can create significant cost burdens. As Sprintlaw advises, “A poorly negotiated lease can lock you into expensive or restrictive terms, expose you to hidden costs, or even threaten your business if things go wrong.”

3. Types of Leasing Arrangements in Australia

Leases come in many forms. Businesses need to identify what kind they’re dealing with as different legal rules may apply.

Key categories include:

Commercial leases: Non-residential premises used for business operations (offices, warehouses, industrial). 
Retail leases: Premises used for retail trade (shops, cafés) which often attract specific statutory protections under, for example, the Retail Shop Leases Act 1994 (QLD) (for retail tenants in QLD). 
Equipment leases: Leasing of assets rather than real estate (machinery, IT, vehicles) with separate legal and tax considerations. 
Sub-leases or assignments: Where the lessee transfers or sublets all or part of their lease to another entity. Particularly significant under the new legislation (see Section 6).

For Queensland businesses, identifying which type of lease you’re entering is crucial—especially because recent legislative reforms (see later) apply to many commercial leases and reshape legal obligations for both lessors and lessees.

 
4. The Leasing Process: From Research to Signing

Here’s a typical step-by-step process for business leasing:

1. Identify your business needs and budget: What size premises/equipment, location, term, renewal options make sense for your business growth and cashflow.
2. Inspect, compare and negotiate terms: Look at comparable premises/equipment, factor outgoings (rates, insurance, utilities), negotiate rent, term length, break clause, renewal option.
3. Due diligence and contract review: Confirm zoning, permitted use, fit-out responsibilities, make-good, and compliance with relevant laws. For retail leases, ensure disclosure requirements are met.
4. Review the lease agreement: Ensure all terms are clear, fit-out permissions are documented, sub-letting/assignment rights spelled out, outgoings allocations clear. Engaging legal advice is strongly recommended. 
5. Sign the lease and prepare for occupation/use: Once signed, your lease obligations begin (rent, outgoings, maintenance, insurance, permitted use). Keep track of key dates (renewal option, rent review).

A key reminder to Queensland-based businesses: leasing premises or equipment remains a legally binding contract - don’t sign before you fully understand the obligations. From Business Queensland:

“A lease is a legally binding contract that gives you certain rights to a property for a set term. You should never sign a lease without understanding all of its terms and conditions.” Business Queensland

 5. Legal Framework & Key Laws in Queensland

5.1 Applicable Laws for Commercial Leasing in QLD
In Queensland, several layers of law may apply:

• For retail leases: The Retail Shop Leases Act 1994 (Qld) and associated regulations govern leases for shops and retail businesses.
• For broader commercial leases: Until recently the key statute was the Property Law Act 1974 (QLD) (PLA 1974). However a major reform - the Property Law Act 2023 (QLD) (PLA 2023) - commences 1 August 2025.
• General contract law, property law, and common law obligations (quiet enjoyment, liability for damages) also apply.

5.2 Key Reform: Property Law Act 2023 (QLD)
The new Act (commencing 1 August 2025) introduces a number of substantial changes to leasing practice in Queensland:

• Standard terms implied into leases (Schedule 1 of the Act) and clarity on which clauses apply. Queensland Small Business Commissioner
• Mandatory landlord consent process for assignments, sub-leases, changes of use, alterations (lessee must give a “proposal notice”; landlord must respond with a “decision notice” within one month) and a requirement that landlords act reasonably. Hamilton Locke+1
• Upon assignment and subsequent reassignment, original tenant/guarantor is released from liability for breach by subsequent assignee (Section 144). 
• Rights and obligations of lessee/lessor bind successors and assignees regardless of whether they “touch and concern the land” (Sections 140/143). 
• Stricter rules for termination, “at will” leases, periodic leases, and standard notice periods (Section 174/175). Ensure Legal
• The reforms apply to existing leases as well as new ones (unless explicitly excluded) – so legacy leases should be reviewed for compliance. 

For Queensland businesses, these reforms mean you must review existing leases and upcoming leases against the new legal regime, as many provisions cannot be contracted out.

5.3 Why This Matters for Leasing

• You can no longer assume that old templates or “standard” clauses are valid without review.
• Many clauses formerly in the “lessor’s discretion” category are now subject to a “reasonableness” test.
• Assignments/sub-letting may be easier (for tenants) but lessors’ rights also shaped by new rules.
• If you plan to exit early, assign, or change your use, you must ensure you follow the statutory process—or risk the landlord rejecting the transaction.

6. Key Terms & Clauses You Must Know

When entering into a lease (or reviewing one) for your business in Queensland, particular attention should be paid to certain clauses:

Every lease should clearly define these and other “hot-spot” clauses.

"Misunderstanding or neglecting lease terms is one of the most common pitfalls.”

7. Risks & Business Pitfalls in Leasing

Leasing offers many benefits, but businesses must be aware of the risks:

• Locked-in term, fixed costs: You may be responsible for rent and outgoings even if business slows or you relocate.
• Ambiguous wording: Vague clauses on outgoings, assignment rights, permitted use, restoration obligations can lead to surprises.
• Unfriendly assignment rights: If you cannot assign or sublet, you may be stuck with premises that no longer suit your business.
• Make-good obligations: Returning premises to original condition can cost tens of thousands of dollars if not negotiated.
• Existing leases failing to reflect PLA 2023 changes: In QLD, many existing leases will require review so they don’t unwittingly breach the new legislation.
  
• Non-compliance with retail leasing laws (if applicable): For retail leases, failure to issue the required disclosure statement can result in termination rights for the tenant. 
• Fit-out & compliance costs: You may be liable for upgrade works (signage, compliance, access) which can escalate costs.
• Business interruption risk: If leased equipment fails, if the premises are destroyed or unusable, the lease must deal with who bears the cost. Under the PLA 2023, rent reduction in some events is implied (Schedule 1). 

To mitigate risk, the following tips are recommended:

• Insert break clauses or early exit rights if your business may relocate/grow.
• Negotiate caps on rent increase or outgoings liabilities.
• Ensure permitted use is broad enough for future change.
• Secure assignment/sub-leasing rights (with caveats) to permit sale or restructure.
• Have a lawyer review the draft lease before you sign - this is especially important under the new QLD law. 

 
8. What Happens At the End of the Lease?

When your lease term ends (or you exercise an option to renew), several steps or issues may arise:

• Renewal or extension: If you have an option, check how to exercise it (notice period, conditions). Under the PLA 2023, if you breach the lease and the landlord gives a proper “breach notice”, they may be entitled to refuse renewal.
• Make-good obligations: Many leases require the tenant to restore the premises to the condition at commencement (minus fair wear and tear). Clarify these costs.
• Assignment or sale of business: If you’re selling your business, the lease may need assignment. Under the PLA 2023 assignment regime, your liability may end if the lease is reassigned again. 
• Vacating the premises: Ensure you comply with conditions for returning the premises, signage removal, repairs, and handing keys.
• Rent review/final adjustments: Ensure you settle final outgoings, utilities, and ensure there are no unexpected bills after you leave.
• Renewal negotiations: If you wish to stay, you may negotiate a new lease or extension. A head-lease negotiation may offer improved terms if your business is well established.
  

It is advisable to diarise key dates well in advance (e.g., option to renew expiry) and engage legal or leasing advisers early to avoid being locked out of renewal or facing purely disadvantageous terms.

9. Why Legal Advice Matters & How to Choose It

Given the financial stakes and legal complexity, obtaining legal advice is strongly recommended when entering or renewing a lease. Here’s why:

• Leases are often drafted favouring the landlord’s interests; a lawyer helps protect your position.
• Your business structure (sole trader vs company) can affect your liability under the lease.
• Under the new QLD law (PLA 2023), many previously standard practices (landlord discretion, assignment, consent) are regulated. Non-compliance can invalidate landlord actions or leave you exposed.
• Lawyers can assist with: lease reviews, negotiation amendments, assignment/sub-lease documentation, exit strategies, dispute resolution.
  

If you’re looking for assistance, check firms experienced in Queensland commercial and retail leasing.

10. Internal Links for More Help

For further guidance, see these resources on our site www.mintlegal.com.au

www.mintlegal.com.au/commercial-lease-review A page on how we review lease documents and advise businesses.
www.mintlegal.com.au/lease-negotiation-services Our support for negotiating key lease terms.

www.mintlegal.com.au/retail-shop-leases-act-qld A deep-dive on the Retail Shop Leases Act 1994 (QLD) and how it affects business tenants.

www.mintlegal.com.au/assignment-subleasing-guide  Guide on assigning or sub-leasing your lease, including new QLD law implications.

11. Summary Checklist for Queensland Businesses Considering a Lease

• Confirm whether your lease is a retail lease (under the Retail Shop Leases Act) or a commercial lease (governed largely by contract law + PLA 2023).
• Review the lease’s key terms: lease length, rent/outgoings, allowed use, assignment/sub-leasing, fit-out, make-good.
• Check that the landlord has complied with statutory disclosure (for retail leases) and that you have clear rights and obligations.
• Under the PLA 2023 (effective 1 August 2025): ensure clauses on consent, assignment, termination and standard terms comply with the new law.
• Negotiate for business flexibility: break clause, renewal option, assignment rights.
• Diarise key dates: rent review, exercise of options, fit-out deadlines.
• Seek legal review at draft stage—this can save far more than it costs.
• Plan exit: make-good obligations, assignment of lease, sale of business.
• Keep all executed documents and supporting approvals/permits in a safe location.
• If you’re unsure whether you’re properly protected, engage experienced leasing advisors.

Final Thoughts

Leasing is an essential tool for many Australian businesses—but getting it wrong can impose long-term costs and burdens. For Queensland businesses, the legal landscape is changincosg significantly with the introduction of the Property Law Act 2023. Whether you’re a tenant or a landlord (lessor), updating your leases, understanding your rights and obligations, and securing professional legal advice can position your business for success and avoid costly disputes down the track.

If you’d like help reviewing your lease, negotiating terms, or preparing an assignment or exit strategy, feel free to reach out via our Mint Legal services.

Keywords: business leasing, Queensland lease law, commercial lease Queensland, retail lease QLD, Property Law Act 2023 QLD, assignment of lease Queensland, make-good clause, commercial property lease Australia.