Exiting a commercial lease can feel complicated, but with the right approach, it can be done legally and efficiently. Leases are binding agreements, but they often include options for early termination. Australian laws also provide protections for tenants in certain situations.
This guide explains your options, including negotiation, assigning or subleasing the lease, and legal avenues to reduce costs and avoid legal issues.
LEGAL GROUNDS FOR TERMINATING A COMMERCIAL LEASE
Here are common ways to terminate a commercial lease early:
1. Mutual Agreement
Agreeing with your landlord to end the lease is often the simplest and quickest option, just ensure it is documented in writing.
2. Landlord Breach
If the landlord doesn’t meet their obligations (e.g., failing to maintain the property), you may be able to terminate. You’ll need evidence and may require legal action.
3. Hardship or Special Circumstances
Certain laws, such as the Retail Leases Act, may offer ways to end your lease early. Consult a legal professional to see if they apply.
Also Read: 9 Tips for QLD Tenants Before Signing Commercial Lease
STEPS TO NEGOTIATE AN EARLY EXIT
Negotiation is often the best way to exit a lease. Follow these steps:
1. Review Your Lease Agreement – Check for clauses about termination, penalties, or options like subleasing.
2. Talk to your Landlord Early – Explain your situation honestly and propose a solution.
3. Offer Solutions – Common solutions can include paying compensation to find a new tenant or finding a new tenant yourself.
4. Get it in Writing – if the landlord agrees, ensure that you document the agreement in writing to avoid any disputes later.
FINANCIAL IMPLICATIONS
Breaking a lease can be costly. Be prepared for:
1. Break Fees – Many leases include fees to compensate the landlord for lost rent.
2. Costs for Finding a New Tenant – you may need to cover advertising or agent fees.
3. Loss of Security Deposit – The landlord may keep your deposit for unpaid rent or damages.
4. Legal and Administrative Costs – You could also face fees for processing the termination.
ASSIGNING OR SUBLEASING YOUR LEASE
If termination isn’t an option, consider assigning or subleasing the lease:
Assignment – Transfers the lease entirely to a new tenant. You may still be liable if they default.
Sublease – Rents the premises to another party while you remain responsible for the lease.
Steps to Assign or Sublease:
- Review your lease for landlord approval requirements.
- Find a suitable tenant who meets the landlord’s standards.
- Get the landlord’s written consent.
- Draft a formal agreement outlining the arrangement.
Also Read: 5 Steps to Recover a Debt in QLD
FINAL ADVICE
Leaving a commercial lease doesn’t have to be overwhelming. By understanding your options, negotiating fairly, or exploring alternatives like subleasing, you can find a solution that works. Always consult a legal expert to protect your rights and reduce risks.
Need Help With a Commercial Lease?
Are you unsure how to get out of a commercial lease? Walker Pender’s experienced commercial lease lawyers can provide tailored advice and solutions to protect your interests.
