What risks get missed in a commercial lease review? It’s rarely about the rent. The monthly figure is the part everyone reads, argues about and remembers. The costly surprises sit further down. Who pays for the roof, what you owe when you leave, whether you can renew and who is personally liable if the business fails? These are the clauses that get missed. They only become visible after signature, when a landlord is no longer interested in changing them. Let’s examine the risks that slip through, why they slip through and when to bring in a specialist.
What are the most expensive lease clauses?
A commercial lease is a long contract written by or for the landlord. Several clauses routinely cost tenants far more than the rent difference they spent weeks negotiating.
- Maintenance and repairs. A lease that makes the tenant responsible for “all repairs” can include the roof, the structure, lifts, air conditioning and the electrical supply. A vague clause leaves the tenant guessing, and a vague maintenance penalty is one of the hidden traps commonly found in these agreements.
- Make-good and reinstatement. When the lease ends, many landlords require the tenant to strip out the fit-out and return the premises to its original condition. That can cost tens of thousands of rand more than anyone budgeted for, and it is often a surprise at the end of a lease, not at the beginning.
- Renewal and option clauses. A renewal right that depends on conditions, notice dates or the landlord’s consent is easy to lose. Miss the notice window by a day and the right is gone, along with the goodwill you built in the location.
- Rent escalation and operating costs. A fixed percentage, a market review or a link to a cost index can change the total dramatically over the term. Recoveries for rates, levies, security, cleaning and marketing contributions are often added on top.
- Personal suretyship. Landlords often ask a director or owner to sign personally, so a company failure becomes a personal debt. The extent and the duration of the suretyship should be negotiated, not accepted by default.
- Deposit and guarantees. How much, held where, in what form, and when it must be returned.
- Cession, subletting and early termination. If your business changes or is sold, can the lease go with it? What does leaving early cost?
- Permitted use and zoning. A lease that names a use the property is not zoned for can leave a tenant unable to trade lawfully. Zoning is controlled by the municipality, in this area eThekwini Municipality for the Upper Highway and the local authority for the North Coast.
- VAT. Whether rent is quoted with or without VAT affects your cash flow. SARS explains VAT in general terms, but what matters is what the lease says.
None of these is exotic. Each appears in ordinary commercial leases, and each can be negotiated before signature. If you are negotiating a lease agreement, consult an experienced commercial property lawyer to review the fine print before signing.
Why do residential conveyancers miss them?
The work is different. A residential practice spends most of its time on sales and transfers using standard Offers to Purchase, municipal clearances and bond registrations. The documents are familiar and the risks are well known. A commercial lease review asks other questions entirely.
- The template is not standard. Commercial leases vary from landlord to landlord, and many run to dozens of pages with schedules, annexures and house rules. The risk is often in the schedule and not in the main body.
- The commercial logic is different. A good review weighs the lease against the business: turnover, fit-out cost, expected term, growth plans and exit options. A residential checklist does not ask those questions.
- Unless your business falls below the R2 million turnover/asset threshold set by the Consumer Protection Act (CPA), standard commercial leases operate under strict contract law where unfair terms are fully binding.
- Under Section 5(2)(b) of the CPA, the Act does apply to a commercial lease if the tenant is a natural person or a small juristic entity (company, trust, close corporation) with an annual turnover or asset value below R2 million.
- Commercial property stacks risks. Commercial deals combine title deed conditions, servitudes, bond structures, suspensive conditions and FICA requirements, and one missed item is carried by the buyer or tenant, not the other party. A specialist commercial property lawyer reviews these clauses against your actual business plans before you sign. My page on commercial property law sets this out, and the question of whether you need a separate attorney is covered in what legal oversight you need for a commercial property purchase in KZN.
The gap between a conveyancer and a property lawyer applies here as well. Gordon explains it in property lawyer vs conveyancer in South Africa. For long leases that must be registered against the title, the Deeds Registry is involved too, which adds another set of formalities.
When should a specialist review the lease?
The answer is before you sign, and in most cases before you pay anything. The best times are:
- When you receive the offer to lease or a heads of terms document. Some terms are fixed at this stage even if the lease follows later.
- Before you pay a deposit or start any fit-out. Once money is spent, your bargaining position is weaker.
- When the lease is long or the fit-out is expensive. The larger the commitment, the more a single clause can cost.
- When a personal suretyship is requested.
- When you are taking over an existing lease through cession or buying a business with a lease attached.
- When you are an investor buying a let building and need to know what the existing tenants are entitled to.
- When a renewal comes up, because renewal is the one point where the tenant can still change terms.
A specialist review reads the lease against your plans, flags what is unusual, and proposes changes you can take to the landlord. I bring 35 years of experience to every commercial instruction as a commercial property lawyer in KZN serving the Upper Highway and the North Coast. The first consultation is free. If you want to check the standing of any attorney, the Law Society of South Africa publishes guidance.
The short answer
Commercial lease review protects you from cost-shifting clauses that only become visible after signature.
Are you about to sign a commercial lease? Get specialist review before you sign.
Book a free 30 minute consultation. +27 82 519 5401 (North Coast) or
+27 31 765 1777.
