Agreement to Lease vs Lease: Understanding the Differences
When it comes to commercial leasing, understanding the difference between an Agreement to Lease and a Lease is crucial. While they may seem similar at first glance, these legal documents serve distinct purposes in the leasing process.
What is an Agreement to Lease?
An Agreement to Lease is a preliminary, legally binding contract between a landlord and tenant, outlining the key terms under which a formal lease will be granted once certain conditions are met. This document helps secure the deal while other formalities, such as lease preparation or property modifications, are being completed.
What is a Lease?
In contrast, a lease is a more formal document that not only outlines the contractual rights but also transfers an interest in the property to the tenant, assuming that is the intention of the parties involved. It defines the contractual rights and responsibilities of both parties, including rent terms, duration, maintenance obligations and renewal options.
Why we recommend all parties sign an Agreement to Lease
At Key + Stone Property, we strongly recommend securing an Agreement to Lease before finalising a lease. This preliminary step provides reassurance to both landlords and tenants, ensuring a legally binding commitment while the formal lease is being prepared. It also helps prevent delays and misunderstandings.
Faster process – preparing an Agreement to Lease is typically quicker than drafting and executing a full lease agreement.
Legal protection – it ensures both parties are committed while the final lease is being prepared or construction works are completed.
Financial security – the tenant pays a holding deposit, usually the first month’s rent, securing their position in the lease process.
Clear terms – it prevents misunderstandings by outlining agreed-upon terms before the lease is formalised.
Need help with your lease?
Navigating commercial leasing requires expertise and attention to detail. At Key + Stone Property, we specialise in guiding landlords and tenants through the complexities of lease agreements, ensuring the right documents are in place for every situation.
If you're navigating the leasing process, Key + Stone Property is here to help. Contact us today to discuss your leasing needs and make informed decisions with confidence.
Readers should seek independent legal advice tailored to their specific circumstances. Key and Stone Property Pty Ltd do not accept any liability for the accuracy or applicability of the information provided herein.