A lease is a contract between the parties to it. Accordingly, much of the common law relating to contracts and their formation will apply to a lease.

This subtopic examines the issues of the formation of leases, such as when a party is bound to enter into a lease with specific reference to leasing examples, and how to protect your client by ensuring:

• that critical issues are considered before the client is bound to enter into the lease;

• the appropriate due diligence is done; and

• the client knows when they are bound to the lease.

The commercial terms that have been agreed between the parties are usually set out in a document called a “heads of agreement”, “lease proposal” or “letter of offer”. This document is signed by both parties and the terms contained in it will form the basis of the lease.

One of the most critical points in relation to a heads of agreement is that it will commonly state when the parties intend to be bound to enter into the lease. The most common practice is that the parties will not intend to be bound to enter into the lease until the lease has been negotiated and the lease has been signed, at a minimum, by the tenant.

This guidance note discusses the conditions that must be satisfied before parties are bound by a lease, the tenant's ability to withdraw from a lease after providing signed documents to the landlord and when a heads of agreement can be binding on the parties to it. See Heads of agreement.

Understanding the considerations and motivations of a landlord can assist when determining how to advise the landlord on amendments to a lease requested by a tenant. This guidance note discusses some of the important considerations for landlords and the investigations a prudent landlord will make in relation to a potential tenant. See Consideration and protection of the landlord.

This guidance note discusses the issues that are critical for a tenant when entering into a lease, the investigations a tenant should carry out before entering into a lease and the protection that a tenant can achieve by lodging a caveat over the title to the premises. See Consideration and protection of the tenant.

A landlord may give a tenant an incentive to enter into the lease. This guidance note discusses the three most common types of incentive, how the details of an incentive can be recorded and the landlord's ability to require a tenant to repay the incentive if a tenant is in breach of the lease. See Incentives provided by landlords to tenants.

A lease must be correctly executed in accordance with the principles of contract law to ensure that the parties to the lease are bound by it. However, in addition to the principles of contract law, each state and territory has its own execution requirements which must be satisfied.

This guidance note discusses the way in which leases must be executed in order to bind the parties under the principles of contract law, sets out the execution requirements of the different states and territories and provides links to the forms which must be used (if any) and to the guides for completing those forms. See Execution requirements.

Leases in some jurisdictions are required to be registered on the title to the premises where the lease has a term of more than three years.

This guidance note specifies the jurisdictions in which leases are required to be registered, when and why the leases are required to be registered and contains links to:

• the required form to use;

• instructions on the completion of the relevant forms; and

• the contact details for the government departments around Australia who deal with land titles and lease registration.

See Registration requirements.

An agreement to lease is a deed separate from the lease. An agreement for lease is entered into where one or more of the critical terms of the lease, usually the rent or the commencement date, cannot be ascertained when the lease is signed or the premises are not yet built as at the date the lease is signed.

This guidance note discusses when it is appropriate to use an agreement to lease, the appropriate content for an agreement to lease and contains a checklist of the issues to consider when drafting an agreement to lease. See Agreements to lease.