Bank Guarantee Requirements in a Commercial Lease

When leasing office space in Brisbane, a Bank Guarantee is one of the most common forms of security required by a landlord under a commercial lease.

For many tenants, particularly those new to commercial office leasing, bank guarantees can feel confusing or overly technical. However, understanding how they work, why they are required, and what landlords typically expect can help avoid delays during lease execution and reduce unnecessary risk.

This guide explains bank guarantee requirements in a commercial lease, what tenants should expect, and how to ensure the process runs smoothly.

What Is a Bank Guarantee?

A Bank Guarantee (BG) is a financial security provided by the tenant to the landlord. It allows the landlord to recover costs if the tenant fails to meet their lease obligations, such as unpaid rent, outgoings, or failure to make good at the end of the lease.

Rather than providing a cash bond, most commercial landlords prefer a bank guarantee because it provides stronger protection and immediate access to funds if required.

Standard Bank Guarantee Requirements

While requirements may vary slightly between landlords, most commercial office leases in Brisbane follow the same core principles.

Correct Tenant Entity

The bank guarantee must be issued in the exact legal name of the tenant entity listed on the lease.

This is critical. If the entity on the bank guarantee does not match the entity on the lease, the landlord may not be able to draw on the guarantee if the tenant is in breach.

Agreed Amount

The value of the bank guarantee must reflect the amount agreed in the signed Heads of Agreement (Offer to Lease).

This amount is typically calculated based on:

• A number of months’ rent
• Plus outgoings
• Plus GST (where applicable)

Drawn in Favour of the Landlord

The bank guarantee must clearly state that it is “in favour of” the landlord.

The landlord’s full legal details are usually provided by the landlord’s solicitor when the lease documents are issued.

Clear Purpose of the Guarantee

The bank guarantee must clearly describe what it secures.

A typical wording may include:

“The Bank Guarantee is provided as security for all obligations of Business Name & ACN/ABN (as Lessee) under the lease and any related tenancy documents for Lease XX on Level XX at [Building Address].”

This ensures there is no ambiguity about when the guarantee can be called upon.

Unconditional and Irrevocable

A bank guarantee must be unconditional and irrevocable, meaning:

• It cannot be withdrawn by the tenant
• It remains in place for the agreed period
• The landlord does not need tenant consent to draw on it if a breach occurs

Issued by an Approved Australian Trading Bank

Most landlords require the bank guarantee to be issued by an Australian trading bank with an Australian banking licence.

Some overseas banks operate in Australia but do not meet this requirement. Additionally, foreign bank guarantee formats often differ significantly and may not be accepted without legal review.

If there is any uncertainty, tenants should seek advice from their solicitor before proceeding.

Payable Immediately on Demand

The bank guarantee must be payable immediately upon presentation, without conditions or delays.

This ensures the landlord has immediate recourse if the tenant defaults.

Expiry Date Requirements

Some landlords request no expiry date, particularly to cover end-of-lease obligations such as make good.

However, market practice is typically:

• An expiry six (6) or twelve (12) months beyond the initial lease term

If all lease obligations are met at expiry, there is no benefit to the landlord in retaining the bank guarantee, and it should be promptly returned to the tenant.

Approval and Delivery Process

Draft Review

Before issuing the final bank guarantee, tenants should email a draft copy to the landlord’s solicitors for approval.

This avoids costly re-issuance if amendments are required.

Final Amount Confirmation

If the landlord needs to survey the tenancy to confirm the final Net Lettable Area (NLA), the bank guarantee amount cannot be finalised until the survey is complete.

This commonly occurs where inter-tenancy walls are being constructed.

Original Document Required

Once approved, the original physical bank guarantee must be delivered.

An electronic copy does not satisfy lease requirements.