Ending a lease early
In the event a tenant or lessor is considering ending a commercial or retail shop lease before the agreed date, it is important to understand the options and the potential consequences.
Provisions of the lease
Leases usually contain rights for tenants or lessors to end a lease before the end of the term in certain circumstances, including (but not limited to):
Even if you have the right to end a lease early, specific processes provided for in your lease will need to be followed and there may implications, for example, providing a notice period, or payment of compensation.
If you believe you have the right to end your lease early under the provisions of your lease, and wish to exercise this right, consult with your legal adviser to ensure that you are exercising your right in accordance with the contract and you are aware of any implications or consequences of exercising that right.
A periodic tenancy rolls on, usually on either a weekly, monthly or yearly basis with no end date. The lease may be periodic from the start, or a fixed lease may end but the parties agree to continue the tenancy on a periodic (month to month) basis.
Under a periodic tenancy, either party can terminate the lease (without reason) by giving at least 1 whole period of notice.
For example, if the period of the tenancy runs from the first day of the month to the last day of the month, either party could give the other a notice to terminate before the first day of the month which would take effect at the end of the following month.
Tips to resolve issues
Alternative options to consider include:
- Leases are legally binding and ending the agreement early likely comes with significant costs.
- If you must end a lease early, negotiating a surrender of lease may save everyone time and money.
Ending for other reasons
If a tenant breaks the lease by ending it early outside of the provisions of the lease (i.e., walks away), this is a breach of the lease and will have legal ramifications.
This can occur following a dispute or ongoing issues between the lessor and tenant.
A QSBC mediator can mediate a dispute up to $750,000 in value. QCAT considers disputes between a tenant and lessor related to retail shop leases if the dispute is not resolved after mediation. Courts consider disputes between a tenant and lessor for non-retail shop leases.
Understand your lease
Parties have likely agreed (within a legally binding contract) to a set amount of time for the lease (the lease term). Review the lease agreement to get a clear understanding of any:
Consider engaging a professional lease negotiator or solicitor experienced in negotiating the early ending of a lease.
If a tenant ends the lease early outside of the provisions of the lease, the tenant may be liable for damages incurred by the lessor as a result of the breach. Typically, tenants are obliged to pay any costs incurred by the lessor associated with the tenant ending the lease early. These costs may be significant and could extend to any damages sustained by the lessor including (but not limited to):
The Security for lease fact sheet has further information regarding the implications on any guarantees.
Download the Ending a lease early fact sheet.