Commercial Leasing in Tasmania — A Tenant’s Guide

Leasing commercial or retail space in Tasmania looks straightforward from the outside — sign the lease, take the keys, open the doors. In practice, a commercial lease is the single largest fixed commitment most small businesses take on, and the fine print determines whether the space works for you for the next three, five, or ten years. This guide walks through what to look for, in the order it usually comes up.

This is a general guide, not legal advice. Every lease is different. Before signing, have the document reviewed by a solicitor experienced in Tasmanian commercial leasing, and speak with your accountant about GST and outgoings.

Retail vs. commercial in Tasmania

Tasmania is unusual in Australia. Most states have a dedicated Retail Leases Act with mandatory disclosure statements, cooling-off periods and prescribed protections. Tasmania does not. Retail tenancies here sit under the Fair Trading (Code of Practice for Retail Tenancies) Regulations made under the Fair Trading Act 1990 (Tas), and general commercial leases sit under common law and the Conveyancing and Law of Property Act 1884 (Tas).

The practical implication: fewer default statutory protections, so what the lease actually says matters more. Read it carefully — and read the disclosure statement, if the landlord provides one, before you agree to the heads of agreement.

Heads of agreement — the document before the lease

Before the formal lease is drafted, the agent will usually issue a heads of agreement (sometimes called an offer to lease). It is short, non-binding on some points and binding on others, and it sets almost every commercial term the lease will later formalise. Get the heads right and the lease is largely a legal wrapper. Get them wrong and you will spend weeks negotiating backwards.

Confirm at a minimum:

Exact premises (with a plan)
Permitted use — as broad as the landlord will allow
Term and options to renew
Commencement rent and rent-free / fit-out period
Rent review method and frequency
Outgoings — recoverable and excluded
Security (bank guarantee amount, personal guarantees)
Incentives (rent abatement, fit-out contribution)
Make-good standard at expiry
Who prepares and pays for the lease

Rent, GST, and reviews

Commercial rent in Tasmania is quoted per square metre per annum, plus GST, plus outgoings. A quote of "$450/m² net" on a 120 m² tenancy means $54,000 a year in base rent, plus GST ($5,400), plus your share of outgoings — often another 15–25% of the base rent depending on the building.

Rent review mechanisms to look for:

Fixed increase: e.g. 3.5% or 4% per annum. Predictable; can bite if inflation falls.
CPI (Hobart All Groups): tracks published inflation. Uncapped CPI reviews carry real risk after the 2022–2023 inflation cycle — negotiate a cap and collar (e.g. minimum 2%, maximum 5%).
Market review: usually at option renewal. Ensure the lease specifies a valuer nomination process and, ideally, a ratchet clause that prevents rent falling below the previous amount (from the landlord's side) or the reverse from yours.

Never sign a lease with a review clause you cannot model. If you do not understand the mechanism, your accountant should.

Outgoings — the real second rent

Outgoings are the operating costs of the building that the landlord passes through to tenants, usually pro-rata by lettable area. In Tasmania a commercial lease can (and usually does) pass through:

Council rates
Water and sewerage rates and usage
Land tax (contentious — see below)
Building insurance
Body corporate levies (in strata-titled buildings)
Building management, cleaning of common areas, lift maintenance, fire services, security
Repairs to common property

Land tax is the item to focus on. In some Australian states it is prohibited from being passed on to retail tenants; in Tasmania under the Code of Practice the position is more permissive but negotiable. Ask for it to be excluded, or capped at a single-holding assessment (the tax as if the landlord owned only that property), which is fairer than passing on the marginal rate.

Ask for a prior year outgoings statement before signing. If the landlord will not provide one, treat that as a red flag.

Term and options

A typical Hobart CBD or suburban commercial lease runs 3 + 3 + 3 or 5 + 5 years. Longer terms give the landlord bankability and give you the runway to amortise a fit-out; shorter terms give you flexibility.

Options to renew must be exercised in writing within the notice window stated in the lease — usually 3 to 6 months before expiry. Diarise the date the day you sign. Missing the window can mean the option lapses and the landlord is free to re-lease, re-price, or negotiate at your expense.

Security — bank guarantees and personal guarantees

Landlords will ask for security equivalent to 3–6 months' gross rent (rent + outgoings + GST), usually as a bank guarantee. Cash bonds are less common and less favourable — a bank guarantee sits with your bank, not the landlord.

If the tenant is a company (particularly a new company), the landlord will usually ask directors to sign personal guarantees. Personal guarantees are enforceable against your personal assets. Negotiate:

A cap on the guarantee (e.g. equivalent to 6 or 12 months' rent)
Release of the guarantee at a defined point (e.g. after two years of on-time payment)
Guarantee limited to the current term, not automatically extended into option periods

Fit-out, incentives, and make-good

In a soft market landlords offer incentives to secure a tenant — typically 10–25% of the base rent over the term, delivered as a rent-free period, a rent abatement, or a cash contribution to fit-out. Get the incentive documented in the lease itself (an incentive deed is fine, but reference it from the lease).

Make-good is what you must do to the premises at the end of the lease. There are three common standards:

Broom clean: hand back tidy, remove your goods. Cheapest and best.
Reinstate to base building: strip out your fit-out. Often costs 5–15% of the original fit-out spend.
Reinstate to original condition: return the premises to how they were at the start, including replacing anything you removed.

If you inherit an existing fit-out ("in-going" fit-out), the make-good obligation can be to a state that never existed — read the clause and take photos on day one. A dated condition report signed by both parties at handover is the single most useful document in any dispute at lease-end.

Permitted use, exclusivity, and trading hours

The permitted use clause defines what you can do in the premises. Draft it broadly ("café and licensed restaurant, and any ancillary retail use") rather than narrowly ("sale of coffee and cakes only") — a narrow use can trap you if your business evolves or you want to assign the lease.

In centres and arcades, ask about exclusivity — a clause preventing the landlord from leasing to a directly competing tenant. In multi-tenant buildings, check trading hours obligations; some retail centre leases require you to open when the centre opens, which affects staffing costs.

Assignment and subletting

You will not think about assignment on day one. You will care about it if you want to sell the business, take on a partner, or exit early. Standard clauses require landlord consent, not to be unreasonably withheld, and often require:

The assignee to be of comparable financial standing
The assignee to provide security
The outgoing tenant to remain liable (a "release on assignment" clause is worth asking for)

Subletting is usually more restricted than assignment. If shared or flexible use is part of your model, negotiate that in.

Repairs, insurance, and services

The lease will allocate responsibility for repairs. Typical split:

Landlord: structure, roof, external walls, common services (lifts, base-building HVAC, fire)
Tenant: everything within the demised premises, glazing, internal plant, tenant-installed equipment

Confirm the landlord holds building insurance and get a copy of the certificate of currency. You will need your own public liability (typically $20M) and contents / plant cover, plus business interruption if the premises are critical to revenue.

Before you sign — a short checklist

Talk to us

MORE Real Estate handles commercial sales and leasing across southern Tasmania — CBD, fringe, and suburban. If you're weighing up a space, or a landlord has sent you a heads of agreement and you want a second read, get in touch. We'll tell you what's standard, what's negotiable, and where to push.

Commercial leasing basics for Tasmanian tenants