Commercial vs residential leasing: what business owners need to know
If you've only ever rented a home, commercial leasing can feel like an entirely different world — because in many ways, it is. Here are the key differences business owners need to understand before signing a commercial lease.
Different legislation entirely
Residential tenancies are governed by the Residential Tenancies Act 1986, which provides significant tenant protections around notice periods, bond limits, and termination. Commercial leases are not covered by this Act — they're governed by contract law and the terms of the lease itself, most commonly based on the ADLS Deed of Lease. This means the specific terms negotiated in your lease matter enormously, since there's far less statutory protection to fall back on.
Outgoings
Unlike most residential tenancies, commercial leases typically require the tenant to pay a share of outgoings — rates, insurance, building operating expenses, and sometimes body corporate or common area maintenance costs — on top of base rent. Understanding exactly what's included, and getting a clear breakdown, is essential before you commit.
Lease term and renewal rights
Commercial leases commonly run for an initial term (say three or five years) with rights of renewal for further terms. Understanding your renewal rights, and the notice periods required to exercise them, protects your business's ability to stay put — or move on — on your own terms.
Rent reviews
Most commercial leases include rent review mechanisms — often market rent reviews, fixed percentage increases, or CPI-linked adjustments, at set intervals. Knowing which mechanism applies, and when, helps you budget with confidence.
Fit-out and make-good obligations
Commercial tenants often invest significantly in fitting out a space for their business. Your lease should clearly address who owns fixtures at the end of the term, and whether you're required to "make good" — reinstate the premises to its original condition — when you leave.
Note: Our commercial division works with both landlords and tenants across Wellington's commercial property market. Get in touch before you sign anything.