Glossary of Terms - Heads of Agreement

A Plain-English Guide to Commercial Leasing

When leasing office space, one of the first documents you’ll encounter is a Heads of Agreement (sometimes called an Offer to Lease). This document outlines the key commercial terms that will later be reflected in the formal lease.

For businesses new to commercial office leasing in Brisbane, many of the terms can feel unfamiliar. The glossary below explains the most common clauses you’re likely to see when reviewing a commercial lease, particularly for office space for lease in the Brisbane CBD.

1.   Lessor / Landlord

The owner of the commercial property. The lessor grants the tenant the right to occupy the premises under the lease.

2.  Lessee / Tenant

The business or individual leasing and occupying the commercial premises.

3.   Premises

The specific, legally identifiable address and area being leased. This will usually reference a particular suite, level or floor within a building.

4.   Lease Term

The length of time the tenant agrees to occupy the premises. This is the initial commitment period and is a key driver of rent, incentives and overall lease value.

5.   Option (Option Term)

A contractual right for either the tenant or landlord (most commonly the tenant) to extend the lease for an agreed period. Option terms may be on the same terms as the original lease or subject to renegotiation.

6.   Lease Commencement Date

The date the lease officially begins. From this date, rent and other lease obligations typically apply.

7.   Net Lettable Area (NLA)

The usable area of the premises measured in square metres. For most part-floor tenancies, common areas such as bathrooms, lift lobbies and balconies are excluded. For full-floor tenants, some of these areas may be included depending on the building.

8.   Face Rent

The advertised rental rate expressed as dollars per square metre ($/sqm). The Heads of Agreement should clearly state whether this rent is net, semi-gross, or gross, as this impacts what additional costs the tenant will pay.

9.   Annual Gross Rental

The total rent payable in the first year of the lease.

Calculation: NLA × Face Rent

This figure is commonly used to calculate the lease incentive, bank guarantee, and security deposit.

10.   Rent Reviews

An annual increase applied to the rent over the lease term. Most Brisbane CBD office leases use fixed percentage increases, though other methods may apply in some circumstances.

11.   Incentive

A financial inducement offered by the landlord to secure a tenant. Incentives in commercial leases may include:

• Rent-free periods
• Rental abatements
• Contributions toward fit out or refurbishment works
• A combination of the above

Incentives are heavily influenced by market conditions, vacancy levels and lease term.

12.   Early Access

Allows the tenant to access the premises before the lease commencement date, usually to carry out fit out works. This clause will outline conditions of access, insurance requirements and any costs payable during the early access period.

13.   Fit Out

Refers to the internal layout and finishes within the premises, including walls, flooring, ceilings, lighting, kitchens and meeting rooms. The Heads of Agreement should clearly state whether the space is fitted, partially fitted or unfitted.

14.   Condition of Premises

Details the agreed condition of the premises at handover. This clause is often supported by a formal condition report, which protects both parties by documenting the state of the space at lease commencement.

15.   Permitted Use

Defines how the premises can legally be used. For most Brisbane CBD properties, this will state commercial office use, confirming the premises is not approved for retail or residential purposes.

16.   Outgoings

The operating costs incurred by the landlord in running the building, such as rates, insurance and common area maintenance. Many CBD leases are semi-gross, meaning tenants pay increases in outgoings above a base year.

17.   Car Parking

Outlines the number of car parks allocated to the tenancy and the applicable monthly rate, if any.

18.   Security / Bank Guarantee

A form of financial protection for the landlord if the tenant defaults on the lease. Typically calculated as six months of the Annual Gross Rental plus GST, though requirements vary based on tenant profile and lease terms.

19.   Insurance

Tenants are required to hold insurance policies to protect both their business and the building owner. Common policies include public liability, plate glass, and insurance covering the fit out.

20.   Lessor Works

Works carried out by the landlord at their cost prior to lease commencement. These may include base building upgrades, services improvements or works within the premises.

21.   Lessee Works

Covers fit out or alteration works undertaken by the tenant. The clause will outline approval processes, standards, and any reinstatement requirements.

22.   Make Good

Defines the tenant’s obligation when vacating the premises. This can range from basic cleaning and removal of furniture to full removal of fit out and reinstatement to base building condition.

23.   Tenancy Cleaning

Outlines whether the tenant must use a building-appointed cleaner or may appoint their own, along with any applicable costs.

24.   Common Area Cleaning

Clarifies whether cleaning of shared building areas is included in outgoings or charged separately.

25.   Utilities and Other Costs

Details how electricity, water and other services are metered and charged, along with any minor additional costs.

26.   Subletting

States whether the tenant is permitted to sublease the premises and the conditions attached, including landlord consent and notice requirements.

27.   Holding Deposit

A deposit paid upon execution of the Heads of Agreement. Typically held in trust by the landlord’s agent or property manager and applied toward lease security once documentation is completed.

28.   Legal Documentation

The landlord’s solicitor usually prepares the lease documents. Each party is responsible for their own legal costs.

29.   Building and Service Hours

Outlines the standard operating hours of the building, commonly between 7am and 6pm, Monday to Friday.

30.   After Hours Air Conditioning

Air conditioning provided outside standard building hours is typically charged on a usage basis. This clause sets out the applicable rates and booking process.

Final Thoughts

Leasing office space is one of the most significant financial commitments a business will make. Whether you’re reviewing your first Heads of Agreement or renegotiating an existing lease, understanding these terms is critical to protecting your business and planning with confidence.

At Caden Office Leasing, we specialise in helping businesses navigate commercial lease Brisbane conditions with clarity, transparency and market insight, ensuring there are no surprises down the track.

Speak with our team to review your Heads of Agreement or explore office space for lease in Brisbane with confidence.