A commercial sublease agreement is the contract that sits under an existing head lease. It allows the existing tenant (the sub-lessor) to rent out part or all of their leased premises to another business (the sub-lessee). This guide explains how subleasing works in Australia, what should go in the agreement, and provides a sample template you can adapt with your solicitor.
How does a commercial sublease work?
In a commercial sublease, the sub-lessor remains the tenant under the original head lease with the landlord. The sub-lessor becomes the landlord of the sub-lessee for the subleased area. The sub-lessee pays rent to the sub-lessor, not to the head landlord, and the sub-lessor continues to pay rent to the head landlord.
This structure is common when a business has excess office space, downsizes, or wants to share industrial overheads. It is also popular with startups that want shorter, flexible terms than a typical three-to-five-year head lease.
Do you need landlord consent?
Yes, almost always — but the requirement comes from the lease, not from statute. Most commercial leases contain a clause prohibiting subleasing without the landlord's written consent. That clause is the source of the consent obligation. Always check the head lease first.
State and territory retail leases legislation works the other way around: rather than creating an approval requirement, it broadly constrains a landlord's ability to unreasonably withhold consent and regulates the process and timeframes for dealing with a consent request. Importantly, that legislation applies only to retail shop leases as defined in each jurisdiction — it generally does not apply to office, industrial or warehouse premises, which make up most of the space listed on SubLeaseHub.
In practice, a landlord will consider whether the sub-lessee is financially viable, whether the proposed use is permitted under the head lease and the building's approvals, and whether the sublease terms are consistent with the head lease. Consent is usually documented in a formal deed of consent.
Key clauses in a commercial sublease agreement
- Parties and premises: Clearly identify the sub-lessor, sub-lessee, landlord, and the exact area being subleased (including a floor plan or photos).
- Term and commencement: State the start date, end date, and any option to renew. The sublease must end before the head lease expires — standard practice is at least one day short. A purported sublease granted for the entire remaining term of the head lease is generally treated at common law as an assignment, not a sublease, which is usually not what either party intends.
- Rent and outgoings: Specify rent amount, frequency, GST treatment, bond or bank guarantee, and how outgoings (rates, strata, utilities, cleaning) are apportioned.
- Permitted use: The sub-lessee's use must be allowed under the head lease and any development approval for the building.
- Condition and fit-out: Record the condition of the premises, any existing fit-out, and who is responsible for maintenance and repairs.
- Compliance with head lease: The sub-lessee should agree to comply with the head lease terms that affect the subleased area.
- Insurance and indemnity: Require public liability insurance, property insurance, and any other insurances required by the head lease.
- Default and termination: Set out what happens if rent is unpaid, the premises are damaged, or the head lease ends early.
- Assignment and further subleasing: Usually, the sub-lessee is not permitted to further sublease without consent.
- Dispute resolution: Include a simple process for resolving disputes before litigation.
Sample commercial sublease agreement template
Read this before using the template
SubLeaseHub is not a law firm and does not provide legal advice. The template below is a general starting point only — it is not tailored to your premises, your head lease, or the law of your state or territory.
Every commercial sublease should be reviewed by a solicitor or licensed conveyancer before it is signed. State-based retail lease laws, planning laws, and the specific terms of your head lease can significantly change what is permitted and what protections each party has.
COMMERCIAL SUBLEASE AGREEMENT
Date: [Insert date]
Parties
- Sub-lessor: [Full legal name and ABN]
- Sub-lessee: [Full legal name and ABN]
- Landlord: [Head landlord name, for consent purposes]
1. Premises
The sub-lessor agrees to sublease to the sub-lessee [describe area, level, car parks, amenities] within [full address] ("Premises").
2. Term
The sublease commences on [date] and ends on [date] (being at least one day before the expiry of the head lease), unless terminated earlier in accordance with this agreement.
3. Rent
The sub-lessee pays $[amount] [per month / per annum] [plus GST if applicable], in advance on the [day] of each [period].
4. Outgoings
The sub-lessee pays [percentage / fixed share] of outgoings including [rates, strata, utilities, cleaning, insurance].
5. Bond
The sub-lessee provides a bond or bank guarantee of $[amount] within [timeframe].
6. Use
The Premises may be used only for [describe permitted use].
7. Head lease compliance
The sub-lessee agrees to comply with all terms of the head lease that apply to the Premises.
8. Consent
This sublease is conditional upon the landlord providing written consent to the sublease.
9. Default
If the sub-lessee fails to pay rent or breaches a material term, the sub-lessor may terminate this agreement after [number] days' written notice.
10. Governing law
This agreement is governed by the laws of [State/Territory], Australia.
Signatures
Sub-lessor: _________________________ Date: _______
Sub-lessee: _________________________ Date: _______
Important notes
Check the head lease expiry date carefully and set the sublease end date before it. Confirm whether your premises fall within retail leases legislation in your state or territory — most office, industrial and warehouse space does not.
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